Mortgage Lending News: How to Evaluate a Reverse Mortgage; One of the few ways to extract home equity, a reverse mortgage can also be complex and expensive.

VANCOUVER, BC (September 6, 2011) Dominion Lending Centres Clearlease Reports Sept. 6, 2011 that a reverse mortgage can be one of the best ways to weather a financial storm at the end of life for senior citizens. Reverse mortgages are also one of the very few ways that older Americans can use a significant portion of the equity they have in their homes without moving or facing new drains on cash flow.

Reverse mortgages, however, come with many caveats. They are complex and expensive, and they are undergoing changes in response to the credit crisis and the drop in home values.

Get the picture. Before you begin the process, be sure you understand how a reverse mortgage works. The mortgages are available only to people over age 62, and while there are no monthly loan payments to the lender, there may be monthly servicing fees. The loan and interest must be repaid when the owners move, die, or sell the property.

Pick your type. By far the most popular reverse mortgage is the Home Equity Conversion Mortgage, insured by the federal government and offered through private banks. There are also public sector loans offered by state and local governments, often aimed at low- or moderate-income homeowners for specific purposes, and proprietary loans backed by the companies that offer them.

Calculate costs. Count on an origination fee equal to 2% of the loan value and a 2% insurance fee, plus other closing costs. Altogether, your costs may add up to 5% of the home’s value. Fees can be folded into the loan amount.

A new option. In 2010, the Federal Housing Administration introduced the Saver loan, which has much smaller upfront costs. In exchange, the amount that can be borrowed is up to 18% less than with a traditional reverse mortgage and the interest rate may be a quarter to half a percentage point higher.

The payoff. How much you can borrow is a function of your age, your home’s value and current interest rates. Generally, the more valuable your home is and the older you are, the more you can borrow.

Rate reversal. In most cases, interest rates on reverse mortgages are higher than what you’d pay for a traditional mortgage and interest costs begin accruing as soon as you take the money.

Know your loan. For years, adjustable-rate reverse mortgages were the most popular and they allowed borrowers to choose whether they wanted a lump sum, a monthly payment or have a line of credit, which could increase over time. But today, fixed-rate reverse loans make up about 70% of the business and proceeds from fixed rate loans must be taken as a lump sum.

Best use. Generally, funds from a reverse mortgage should be used for needed home improvements, to supplement your income or perhaps to keep a home out of foreclosure. Lump sum payments must be managed carefully so they don’t slip away.

Figuring it out. Because of the costs and risks associated with these loans, they should be a last line of financial defense, so proceed with caution.

Help is available. Applicants for HECMs must first meet with housing counselors from the Department of Housing and Urban Development, who will walk you through the process and help you figure out how much you can borrow.

Other options. Depending on your circumstances, you may also want to consider a regular home-equity loan, like a home equity line of credit, or selling your home to your children or other relative and leasing it back. If money is very tight, many state governments have special programs to help seniors pay property taxes or make needed repairs.

What not to do. Because this may be your last major asset, use the money carefully. Don’t waste it on a hot tub or use funds to play the stock market.

Don’t pay fees up front. Loan fees should be included in the loan balance and paid when the loan is settled. Don’t let someone tell you that fees must be paid only after you have the cash in hand.

Don’t pay off a traditional mortgage. Unless you’re trying to avoid foreclosure, look for another way to handle your current mortgage. The cost of the reverse mortgage will likely be much higher paying off your existing balance.

Don’t buy an annuity. Instead, pick a reverse mortgage that allows you to get a monthly payment, which essentially functions as an annuity.

About Dominion Lending Centres Clearlease

Dominion Lending Centres Clearlease Commercial (DLC Clearlease/Clearlease.com) is a fully diversified Lease Finance Mortgage Banking Brokerage Company specializing in Equipment Leasing, Automobile Leasing, Residential, Commercial Lending/Mortgage Financing. DLC Clearlease possesses the capability to accommodate financing needs ranging from a small second Home Mortgage to a Multi-Million Dollar Commercial Projects. No mortgage is too small or too large for this integrated Company.

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Dominion Lending Centres Service Areas Include: British Columbia, Abbotsford, Armstrong, Burnaby, Campbell River, Castlegar, Chilliwack, Colwood, Coquitlam, Courtenay, Cranbrook, Dawson Creek, Duncan, Enderby, Fernie, Fort St. John, Grand Forks, Greenwood, Kamloops, Kelowna, Kimberley, Kitimat, Langford, Langley, Merritt, Nanaimo, Nelson, New Westminster, Metro Vancouver, North Vancouver, Parksville, Penticton, Pitt Meadows, Port Albern, Port Coquitlam, Vancouver, Port Moody, Powell River, Prince George, Prince Rupert, Quesnel, Revelstoke, Richmond, Vancouver, Rossland, Salmon Arm, Surrey, Terrace, Trail, Vancouver, Vernon, Victoria, White Rock, Williams Lake.

For more information please visit us at: http://clearlease.com/mortgage.html

About Dominion Lending Centres Clearlease

Dominion Lending Centres Clearlease Commercial (DLC Clearlease / Clearlease.com / DLCC/DLCCC) is a fully diversified Lease Finance Mortgage Banking Brokerage Company specializing in Equipment Leasing, Automobile Leasing, Residential, Commercial Lending/Mortgage Financing. DLC Clearlease possesses the capability to accommodate financing needs ranging from a small second Home Mortgage to a Multi-Million Dollar Commercial Projects. No mortgage is too small or too large for Dominion Lending Centres Commercial Capital (DLCCC).

Equipment Lease Financing in Vancouver, Surrey, Delta, Richmond, Langley, New Westminster, North Vancouer, West Vancouver, B.C. Also offering Automobile Lease Financing and Mortgage information. Founded by the Pidgeon brothers Alexander Pidgeon and Rene Pidgeon.

You may have recently seen a Dominion Lending advertisement on such media outlets as: Global News, CTV News, CBC Television, Rogers Sportsnet or possibly heard the great Don Cherry, a Canadian Sports legend, discuss Dominion Lending Centres.

Contact:
Dominion Lending Centres Clearlease
HEAD OFFICE, Bentall Two, Suite 900,
555 Burrard Street, Vancouver, BC, V7X 1M8, CANADA.
Mr. Alexander Pidgeon, Editor in Chief
Tel: (604) 696-1221 ext. 199
eMail: alex@clearlease.com
Website: http://www.clearlease.com
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Twitter: @clearlease
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