Dean Graziosi

Reverse mortgages are often marketed to seniors as an excellent way of getting rid of debt and paying off medical bills. Some ads even go so far as to say that a reverse mortgage is a good way of not only getting extra income every month but also leaving your loved ones without having to worry about payig anything off after you die. While all this may sound like a fantastic idea, the fact is that a reverse mortgage is not right for everyone or for every circumstance. You need to understand exactly what a reverse mortgage is and what you can do when you have one before you decide to get a reverse mortgage.

A reverse mortgage is exactly what the name sounds like. Traditionally, you take out a mortgage from a bank and you pay on it every month until you have paid the bank back everything you owe and finally own your home. With a reverse mortgage, this process is reversed. Each month, you will get payments from the bank. Your credit score is not considered when you apply for a reverse mortgage. Neither is your income. You do not have to pay the reverse mortgage back until you no longer live in your home.

There are three kinds of reverse mortgages. The most common is a HUD program called the Home Equity Conversion Mortgage (HECM). Around 90% of all reverse mortgages are this type. The fees are regulated and counseling is required. Those who are very low income can use Single Purpose reverse mortgages to pay for things like maintenance or property taxes. Charitable groups and local governments manage these. There are also private lenders who do reverse mortgages but these are not regulated.

The more equity you have the more you can borrow but if you have a mortgage you have to be able to pay it off before you can get the reverse mortgage. Another factor is your age - the older you are the more you can borrow. You can get the funds in a lump sum, monthly payments, or as a line of credit to use when you need it. You can also combine those options so that you can take care of things such as debt and still have a line of credit that you can use to take care of emergencies such as an unexpected illness or home repair.

There are fees associated with a reverse mortgage and some risks as well. You will have to buy mortgage insurance which can be very expensive. You also should keep in mind that the loan will need to be repaired. If you move out of your home and into an assisted living facility for example, then the reverse mortgage will have to be repaid. This can easily prevent you from being able to leave your home to your children or grandchildren, as they may be unable to pay it off.  

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If you are selling a home, one of the best offers you can receive is that of cash. Any time someone makes a cash offer, you know as long as they actually have the cash, the selling process will commence immediately. Often times, sellers accept cash offers quickly and many buyers who are not offer cash lose out when their own offers are beaten.

If you are a prospective home buyer who wants to offer cash, it is a good idea to provide documentation with your offer that will prove the funds are available. A bank statement will usually work quite well in these situations.

If you don’t yet have the cash, but will very soon, other documentation will be needed. An example of this would be if you plan to liquidate stock or another type of asset. Here, you will need to provide a time table on when the asset will be converted to cash. Again, you will include this documentation with your offer.

While it is rare to pay for a new house using cash, it is possible. If you can do so, it is highly recommended. Some people are able to do this from the sale of other property. If you are able to get out the home you are selling exactly what you put into it, a cash payment may very well be possible. This is especially true if you have saved a significant amount of money to put toward the down payment of your new home.

Some home buyers expand slowly, paying cash for all their homes along the way. Many factors are involved in making this happen. Not only would you need to have the cash saved up and available, but the economy would also need to work in your favor.

If you have rental property, you may even choose to put the money you receive each month as a landlord into savings for purchasing new property on down the road.

Many sellers prefer cash offers because they re getting the money up front. Buyers prefer them because the home can be paid for very quickly, thus eliminating the need for a 30 year mortgage.

If you are the one making the offer, the key is to start by purchasing smaller homes and later working your way up to larger ones. Starter homes are a good way to begin. As you make money on each house you sell, you will be able to put it into your next purchase. Over a period of time, you will accumulate enough money to actually pay for a house in cash. This often brings peace of mind and financial security you would not have with a 30 year mortgage. Your home is paid for before you ever move in, and the seller rests easy knowing all the money has been received up front. 

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When you purchase a home, chances are, things will go smoothly. While there are bound to be a few problems along the way, you want to minimize the chances of something going wrong as much as possible. The more you know about the contract you are entering into, the fewer problems you may have throughout the entire process. This is why it is a good idea to anticipate potential problems that could occur. This makes it much easier for you to cancel the contract without penalty should something go wrong. These are what are known as contingencies. You will want to include them whenever you make an offer on a home.

An example of a contingency would be as follows. Some buyers choose to purchase a home before selling the one they currently own. Sometimes, even if the home is sold, it is probably still pending and has not yet closed. This situation would call for a contingency where the sale of the home is required to be final before the actual purchase of the new one. This condition would then be written into the offer. Failing to do this could result in two mortgage payments for the buyer instead of one. This is an important part of the offer since no prospect buyer wants to pay for two mortgages at the same time.

There are other common contingencies that should be included when you make an offer. Since you will most likely need a mortgage in order to buy the new home, one condition of your offer could be that suitable financing is successfully obtained before anything is finalized. You also want to be sure the property appraises for the amount you are offering, so this is another condition you would definitely want to include. Also, during the escrow period, certain inspections will most likely be required by you. You could write in another contingency that all inspections must be passed before the sale will take place.

Contingencies are there for your protection. Should you find yourself unable to keep your promise to purchase a home. There are also circumstances that could occur that would make buying property impossible. These situations usually involve money, and since this is commonly the case, you want to be sure you can get out of your agreement without being out a lot of cash. This is an important part of any sale and you should definitely discuss it with your real estate agent.

Your realtor can discuss all types of contingencies with you and advise you on which ones should go into your contract. Your specific situation will be taken into account so as to find the best solution for you should it be needed. Chances are you won’t, but you always want to be prepared just in case.

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