We talk to many senior homeowners who desire a reverse mortgage and due to one circumstance or another, simply can’t take advantage of the program. For example, on one of the popular jumbo reverse mortgage programs today, a single 65 year old borrower would receive a principal limit of $631,800.00 and a couple with both borrowers aged 65 would receive a principal limit of $594,000.00.
The reason for the difference is because reverse mortgages operate much the same as insurance products which utilize actuarial tables, the older you are the more money you can receive. Statistics show that married borrowers live longer so the couple the same age as the single borrower actually receives less money.
But for borrowers with existing financing to retire, even the $631,800 may not be adequate for their needs. What do you do if you are a senior borrower or couple in need of funds and you still owe $1,000,000 on your $2,000,000 home?
There is another option for senior homeowners out there which is not considered a loan but rather a real estate transaction known as the Equity Key Product. The Equity Key is unique in a number of ways. Homeowners are actually agreeing to give up a percentage of future equity for a cash settlement today. For example, using our borrowers above, the single borrower can arrange for 10-15% of the value of their property for 50% of their future equity. Which means that for a cash payment of $300,000 today (if the borrower qualified for the maximum), the borrower or the borrower’s heirs would have to pay half of the equity gained on the property when it was sold.
If the borrower kept the property for 10 years and the value grew by 5% per year, the value would be approximately $3,000,000 and then the borrower or the borrower’s heirs would have to pay half of this amount to Equity Key, or $500,000.
This may sound like a lot of money to repay but think about this principal and interest alone at an average of 6.5% on a $300,000 loan would be over $573,000 without any fees that a typical mortgage charges that would have to be paid back instead of the $500,000 that the Equity Key will receive. And the Equity Key does not charge large origination and other fees like a typical mortgage.
Another good feature is that Equity Key also does not require that existing liens be paid off when you receive their funds. If more than one borrower is being considered then they can opt for between 20-30% (again depending on qualification) of the value of the home for 100% of all future appreciation.
The main feature is that the money can be used for any purpose and many borrowers utilize a portion of the funds to secure life insurance policies to not only lock in their current equity, but also to replace the equity that they pay to Equity Key upon their passing with a non-taxable life insurance payment to their surviving spouse or heirs. Unlike reverse mortgages, Equity Key can be utilized with commercial properties, land, multiple properties, non-owner occupied homes and just about any real estate.
As stated earlier, it’s not considered a loan but rather a real estate transaction. It also requires the borrower(s) to obtain a life insurance policy (which Equity Key pays for) so there is an additional requirement under this program that the borrowers must be insurable. There is more to the program that cannot all be explained here, but it’s got some really great features.
Just like reverse mortgages, this program is not for everyone. But for those who do not want to pay the up-front costs associated with reverse mortgages, for those who are concerned that there may be too much interest accrued on a reverse mortgage, for those who have a mortgage and are short with the reverse mortgage proceeds of retiring that debt, or for those who have a piece of real estate or occupancy type for which a typical reverse mortgage will not work (or need to use multiple properties to make the deal work), Equity Key may be the ideal reverse mortgage alternative.
Equity Key Program Features:
* Eligible Properties: Primary, Investment, Second Homes & Commercial Real Estate
* Maximum allowable 1st TD Lien 80% of property Value (LTV)
* Will not accept negative amortizing 1st lien
* Combine Multiple Properties (cross collateralize)
* Money received is NOT a debt and does not effect current equity positions
* No Closing Costs ($300 Refundable Application Fee)
* Minimum Property Value $500,000
* Minimum Age Requirements: 65-85Yrs
FHA home loans are alternatives to conventional financing for your next Florida home purchase. The FHA (Federal Housing Administration) helps to make low cost home loans available to thousands of new and current Florida homeowners every year. FHA home loans require minimal down payments of only 3.5% and the interest rate is typically slightly lower than prevailing conventional Florida rates.
The FHA currently guarantees more than 1,000,000 mortgage loans. This agency has helped originate more than 30 million since its creation in 1934 as part of the New Deal. The FHA does not fund the home loans itself. However, It does insure private FHA approved mortgage lenders against loss. In this way, FHA mortgage lenders are encouraged to make loans to low and middle income borrowers who have less than perfect credit and would not otherwise qualify for a home loan.
Florida home Buyers of single family homes can put as little as 3.5% down payment when obtaining an FHA mortgage loan. Good credit history is not necessary, although is definitely a “PLUS.” Income to loan payment, and to total monthly payment, ratio requirements are less stringent than for conventional mortgage loans. The FHA home loan will sometimes help finance your closing cost up to 6%. Ask your FHA mortgage lender about this.
Florida home buyers should know the many advantages of the FHA mortgage loan programs. FHA home loans were created to help increase home ownership. For the Florida home buyer the FHA program can simplify the purchase of a home, making financing easier and less expensive than a conventional mortgage loan product. Some highlights of the Florida FHA loan program include:
Minimal Down Payment and Closing costs.
Down payment less than 3% of Sales Price Gifts are allowed Seller can credit up to 6% of sales price towards closing and prepaid costs. 100% Financing available No reserves required. FHA regulated closing costs.
Easier Credit Qualifying Guidelines such as:
No minimum FICO score or credit score requirements. FHA will allow a home purchase 1 year after a Bankruptcy. FHA will allow a home purchase2 years after a Foreclosure.
To take advantage of the FHA program in Florida, give us a call 1-800-570-0448 or visit http://www.fhamortgagefhaloan.com/
For first time home buyers and other borrowers, the FHA home loans can have key advantages:
Easy Qualification – The FHA loan insures lenders against loss for loans made to properly qualified FHA home loan borrowers. So you’re likely to find FHA mortgage loans with terms that make it easier for you to qualify.
Minimal Downpayment Requirements – FHA mortgages can work with as little as 3% down and those funds can come from a family member, charity, or your employer. Although the FHA loan does not have a zero down mortgage option yet, you will find that your 1st Continental Mortgage loan officer can point you to many Downpayment assistance programs that work well with Florida FHA home loans.
Less than A-1 Credit is Okay – The Florida FHA home loan program exists to expand the pool of home buyers. Even borrowers with prior bankruptcies or mortgage lates get approved every day for FHA mortgages to buy or Refinance homes in Hillsborough County or any of the other Florida counties we serve. The FHA loan program uses credit quality, not credit score!
Lower Cost Over the Life of the Loan – The Florida FHA home loan rates are extraordinarily competitive. FHA’s lower risk to the lender means a better rate for the borrower.
Safeguards for Borrowers Who Get Behind – The Florida FHA loan mortgages also allow the lender more options in helping borrowers who fall behind keep their homes are get current again: special forbearance, workouts, even free mortgage counseling. Further, HUD can allow the lender to take past due payments and move them to the end of the loan and in some instance will actually pay your past due payments for you. Options to save your home you’ll never get from a conventional loan! In an uncertain world, this is another excellent reason for you to get an FHA mortgage.
Options for Manufactured Housing – Under certain conditions, you can even finance a Mobile Home or manufactured home using a Florida FHA mortgage loan. Call 1-800-570-0448 to get pre-approved for a Florida FHA loan for manufactured housing or just use our quick application to learn more!
FHA Loans Are Fully Assumable – When you are ready to sell your home, you can offer buyers FHA financing! All FHA loans can be assumed by qualified buyers.
These are just seven of the many good reasons to apply for an FHA mortgage. Call 1-800-570-0448 to speak with a friendly Florida FHA loan specialist now!
The FHA program has evolved since it started in 1934 and now has options for HUD insured loans that fit a variety of different borrowers and situations.