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Reverse mortgages are gaining in popularity as more senior’s start looking for ways to supplement their retirement incomes. And as the interest in reverse mortgages increase, so are the cases of reverse mortgage fraud and scams. Many seniors are finding that they have lost thousands pounds of their hard earned equity to these reverse mortgages scams. Since reverse mortgages typically involve our largest asset (your home), this type of fraud can have a serious negative impact on your retirement. The following reverse mortgage fraud information will help you avoid becoming a victim of a reverse mortgage scam.

Reverse Mortgage Scams

The are several types of reverse mortgage scams that can end up costing you thousands and even tens of thousands of pounds in equity in your home if you become a victim.

Charging for free information on reverse mortgages

Several estate planning companies have been charging thousands of pounds for information provided free from HUD. Typically these companies charge for this information as part of an estate planning program. Seniors that sign up for these programs are unaware that these firms are collecting thousands of pounds by charging a fee of 6 to 10 percent of the total amount borrowed. These fees costs the victims 6,000 to 10,000 on a 100,000 reverse mortgage. HUD has recently issued a directive to lenders that issued reverse mortgages insured by the Federal Housing Administration (FHA) to stop doing business with these companies.

Pushing reverse mortgages as a way to pay for purchases

Some companies that sell large ticket items or services, like annuities or insurance products, may try to suggest using a reverse mortgage as a way fund these purchases. When the additional cost of the reverse mortgage is factored into the purchase, it ends up costing the homeowner much more than the benefit provided by the product or service.

Unethical reverse mortgage terms

Some lenders slip in excessive fees and terms into their contracts. These terms can have a serious effect a Seniors equity. In some cases, lenders have used shared equity or shared appreciation terms, which gives the lender the right to collect a portion of the appreciation when the home is sold or refinanced. The cost of these type provisions can run into the tens of thousands as the home appreciates. These rising cost provisions eat up equity without providing any additional benefit to the homeowner.

Protecting yourself from reverse mortgage scams

If you are looking into reverse mortgages, there are several things that you can do to protect yourself from falling victim to these types of scams.

1. Speak with a HUD approved reverse mortgage counselor. The counselor will help you understand reverse mortgages and help you evaluate your situation.

2. Obtain several offers from different reverse mortgage lenders in order to compare different options. The rule of thumb is to get at least three
separate offers so that you have a good comparison of the terms offered.

3. Make sure you understand all the terms and conditions within the reverse mortgage contracts. Your reverse mortgage counselor can guide you through
the contracts.

4. You generally have three business days after signing the loan document to cancel it for any reason.

If you suspect that a company is operating in violation of the law, let your reverse mortgage counselor know and then file a complaint with your State Attorney General’s office or banking regulatory agency and the Federal Trade Commission (FTC) at www.ftc.gov.

Mortgage loans are financial loans taken for real estate properties that the borrower has to repay with interest within a fixed period of time. A mortgage loan requires some sort of security for the lender. This security is called the collateral and in most cases, it is the real estate property itself for which the mortgage loan has been taken. Since the property itself is kept as the collateral, no further security is needed.

The person who lends the mortgage loan is called the mortgagee, while the person who borrows the loan is called the mortgagor. The mortgagee and mortgagor are bound by the mortgage loan agreement. The agreement entitles the mortgagor to receive a financial loan from the mortgagee. The promissory note in the agreement secures the mortgagee, which entitles them to the collateral and a promise made by the mortgagor to repay the mortgage loan in due time. In the USA, the typical period for a mortgage loan may be 10, 15, 20 or 30 years.

There are two fundamental types of mortgage loans in the USA fixed-rate mortgages and adjustable-rate mortgages. Fixed-rate mortgages have interest rates that are locked for the life of the mortgage, while adjustable-rate mortgages have interest rates that may go up or down according to some market index. Hence, fixed-rate mortgages provide security to the mortgagor, while adjustable-rate mortgages provide security to the mortgagee. If there are dues on monthly payments, then they are added together and constitute a balloon mortgage loan.

The process of buying a loan is called originating the loan. This is done between the mortgagor and the mortgagee, sometimes involving a mortgage broker. The broker charges a commission on every loan originated, which is collected from either the mortgagor or the mortgagee. A brokers involvement increases the cost of the entire mortgage.

Mortgage loans below 80% of the entire property value need added security for the mortgagee. This is done in the form of insurance policies, called mortgage insurance. The premiums of mortgage insurance policies are passed on to the borrower in their monthly payments. However, if the mortgagor makes at least 20% of the down payment, then the mortgage insurance may be waived.

In the US, there are several types of mortgages available. The most important mortgages are those which are originated by the Federal Housing Administration. These very popular loans are called Fannie Mae, Freddie Mac and Ginnie Mae loans. Fannie Mae mortgages are the most popular types of mortgage loans in the USA.

People are asking if home loans in newspaper ads showing astonishingly low rates are for real. These ads are what we call adjustable-rate mortgage payments.

Loans with an adjustable-rate mortgage payment type usually have low rates only for a short time. Rates of adjustable-rate mortgage payment are adjusted on a regular basis, usually after the first year is over. This means that the interest rate and the amount of the monthly adjustable-rate mortgage payment may vary, going either up or down.

With adjustable-rate mortgage payments, there is little chance of you knowing what your future monthly payment would be. Some types of adjustable-rate mortgage payments have limits to the interest-rate increase. When an adjustable-rate mortgage reaches a certain percentage, the interest rate will no longer increase for the duration of that period. But at the end of that period, the adjustable-rate mortgage payment will vary once more.

Determining whether or not an adjustable-rate mortgage payment is the right type of loan for you usually depends on your financial situation. Also, it depends on the type of adjustable-rate mortgage payment you plan to make. Adjustable-rate mortgage payments have characteristics that might ultimately prove risky in the long run. Because the dynamics of interest rates in the market are never certain, the amount of your adjustable-rate mortgage payments are uncertain as well.

Adjustable-rate mortgage payments generally have lower initial interest rates compared to fixed-rate mortgages. This makes an adjustable-rate mortgage payment more affordable and easier on the pocket. Adjustable-rate mortgage payments may also help you qualify for a larger loan. This is due to the fact that lenders sometimes decide to extend a loan provided that your current income is steady and your adjustable-rate mortgage payments for the first year are up-to-date.

Another advantage of having an adjustable-rate mortgage payment type of loan is that it could turn out to be less expensive in the long run. With an adjustable-rate mortgage payment, the chance of interest rates going higher is equal to its chance of going lower. Now here in also lies the risk of having an adjustable mortgage payment.

When it comes to having an adjustable mortgage payment, there are no guarantees. It is either the interest rates will lower down or it will rise up. Lower interest rates mean lower monthly adjustable-rate mortgage payments. Higher interest rates mean higher monthly adjustable-rate mortgage payments for you. There is no middle ground. Adjustable-rate mortgage payments are basically a trade-off you exchange more risk for lower rate with an adjustable-rate mortgage payment.

But despite this, there are some ways to circumvent the risks and increase your chances of landing a good investment in an adjustable-rate mortgage payment. Below are some questions you need to consider:

Is there a possibility that my income will rise up enough to cover higher adjustable-rate mortgage payments should interest rates go up?
Is there a chance that I might take on other sizable debts like a loan for a car or school tuition in the near future?
Will my adjustable-rate mortgage payments increase even though interest rates remain the same?
How long do I plan to own this home? (If you plan on selling soon, an increase in interest rates should not be a problem for your adjustable-rate mortgage payment.)

Buying a home can be an exciting and stressful time for anyone. While you may be excited at the prospect of owning your own home, especially if it is your first home purchase, the idea of choosing between all of the many different types of mortgages may leave you feeling confused and apprehensive.

Two of the most common choices youll find in the mortgage market are adjustable rate mortgages and fixed rate mortgages. Fixed rate mortgages are the most traditional type of home mortgage, offering a fixed interest rate that does not change throughout the life of your loan. There are a number of important advantages associated with this type of mortgage. First, if you are budget conscious, this type of mortgage will give you the peace of mind in knowing that your monthly mortgage amount will not change. You can budget the remainder of your financial obligations without worrying about a changing mortgage payment to throw things off.

An adjustable rate mortgage works differently. With this type of mortgage you may be able to obtain a lower interest rate than would normally be available with a fixed rate mortgage; however, the interest rate is not fixed. This means that your monthly mortgage rate may change as interest rates change. With such a mortgage you may not be able to regularly plan your budget due to such fluctuations. While there is usually a cap that will keep the interest rate from fluctuating too much, even a little fluctuation can be too much for some homeowners. Of course, there is also the possibility that interest rates will drop and if that is the case, because your mortgage is adjustable, your monthly payments will drop right along with the interest rate.

When deciding whether a fixed rate or adjustable rate mortgage is your best choice, you need to give thought to several factors. Ask yourself whether it is more important to be able to plan your monthly budget without wondering whether your mortgage will fluctuate or whether you would prefer to receive a lower interest rate in the beginning of your mortgage.

Remember that if you decide you would like to obtain the advantages of both you do have other options available to you. For example, if you feel the interest rate offered to you on a fixed rate mortgage is too high but you want the security of not having to worry about a fluctuating interest rate you can always buy down your interest rate by purchasing points. This will mean more up front costs for your mortgage; however, it may be worth it to decrease the interest rate, especially if interest rates are currently high.

If you do elect to go with an adjustable rate mortgage make sure you understand exactly how high the rates may go as well as ensure you have enough wiggle room in your monthly budget to cushion increases if they occur. This may help to keep you out of a tight spot and possibly losing your home due to rising interest rates.

Over the last few years, thousands and thousands of homeowners have financed or refinanced their homes with ARM’s, Adjustable Rate Mortgages.

ARM’s are mortgages that are tied in to lower interest rates in the beginning so that many homeowners can afford their monthly payments. As long as interest rates stay even or go lower, the home owner is fine. The danger comes when interest rates start to rise. Monthly payments can go up hundreds of dollars when the interest rate/payment terms come into effect.

That danger is now. Interest rates have been going up as The Federal Reserve has raised rates for the 15th time in the last two years. And, it doesn’t look like rates are going to stop going higher anytime soon. As these mortgages reset to higher rates and payments, many of these ARM homeowners are going to be in a financial bind. Many may even lose their homes.

According to the Mortgage Bankers Association at the end of 2005, some states such as Michigan, Missouri, Tennessee and Alabama have as many as 20% of the ARM homeowners behind by thirty days or more. Foreclosure proceedings usually start when a homeowner is ninety days late. Hopefully, these homeowners will get refinanced before it is too late.

If you have an ARM, you should look at your finances to be sure you will remain solvent in these upcoming times. How high can your monthly house payment go? Will you be able to afford it? Talk to a financial adviser and determine if refinancing to a fixed rate is the best way for you to go. I believe locking in a fixed rate is the safest decision you could make at this moment in time.

There are many mortgage companies that will look to provide refinancing options for you. Unfortunately, many of these companies may be much more stringent in regards to your credit worthiness. That is, it may be much harder to borrow that money now than when you initially purchased your first or second mortgage. You will never know unless you try and the clock is ticking.