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What Is A Reverse Mortgage?

by Mark Rieger, Mark Rieger Realty

 

According to the U.S. Department of Housing and Urban Development (HUD), about half a million Americans who are 62 or older currently hold a reverse annuity mortgage.

 

A reverse mortgage is simply a home equity loan that is designed to defer your mortgage interest and is secured by your home.

 

With a traditional mortgage loan, the homeowner makes scheduled monthly payments over a specified term (usually 10-, 15-, or 30-year mortgage loans). With a reverse mortgage, the interest is not due until the loan reaches maturity. As long as the homeowner continues to reside in the home and pays their property taxes and insurance, they can take advantage of holding off on monthly payments on the amount they borrowed.

 

To qualify for a reverse mortgage, a homeowner must be 62 years old or older with substantial equity in their home. There are no income or credit score requirements and no monthly repayments, but the homeowner must continue living in the home as the primary residence and pay property taxes and insurance.

 

The amount of money a homeowner can borrow with a reverse mortgage loan is dependant on:

 

  • Appraised value of the home;
  • Balances of any outstanding mortgages and other liens;
  • Interest rate to be applied;
  • The homeowner’s age;
  • Whether proceeds are taken as monthly payments, a line of credit, or in a lump sum.

 

A reverse mortgage is a form of installment borrowing. The loan does not have to be repaid unless paid voluntarily, or until the homeowner dies, the home is sold, or the owner vacates the property for more than one full year.

 

Keep in mind, however, that the beneficiaries of the home will ultimately be responsible to pay off the loan once the homeowner dies. The heirs have up to 12 months to complete a sale or pay off the balance of the loan. If the heirs choose not to act, the reverse mortgage lender will have to foreclose on the home. In the event that the sale of the home does not produce sufficient funds to pay off the balance of the reverse mortgage, the government insurance the homeowner would have paid as part of closing the reverse mortgage loan will cover the estate.

 

Reverse mortgage loans are meant for those who do not have enough income to meet their needs. However, because there are costs associated with setting up a reverse mortgage, such as appraisal and origination charges, it is not recommended for homeowners who don’t intend to continue living in their home long-term.

 

The Federal Housing Administration requires anyone looking at a reverse mortgage option to receive independent 3rd party counseling by phone or in person. Once the counseling is completed, the homeowner will receive a certificate of completion, which is then delivered to the lender of their choice. Approved counseling agencies can be found here.

 

A reverse mortgage loan is a decision that requires careful thought and planning. Contact us today to discuss whether a reverse mortgage is the right option for you.

Top 10 Home Improvement Myths

by Mark Rieger, Mark Rieger Realty

‚ÄčI read this on Trulia recently and thought it was an interesting article to pass along. If you have any questions after reading it, please let me know.

Top 10 Home Improvement Myths

Not all home improvements are created equal. Even in a seller’s market, it’s important that homeowners make the right investments that will yield higher returns. As you guide your clients toward a profitable sale, make sure you’re an expert on the top 10 home improvement myths so you can prevent your clients from believing them.

Father’s Day is next week, and Dad is sure to get a few tools or gift certificates to a home improvement store that he’ll be itching to use, so make sure your clients are in-the-know before then!

Top 10 Home Improvement Myths

1. Any remodeling project will add value to your home.

While many remodeling projects will add value to a home, some can be seen as a negative by future buyers. For instance, combining two smaller bedrooms to create one larger bedroom may better fit one homeowner’s lifestyle today, but it may cause the home to lose value in the eyes of a future buyer who needs the two separate rooms.

2. Buying the highest-quality materials attracts more buyers.

Installing high-end materials may seem like a wise decision, but it can backfire. For instance, using the most expensive tile in a bathroom may create an impressive appearance, but value-conscious buyers may opt for a more affordable home if the seller has over-improved compared to others in the neighborhood.

3. Adding square footage always adds value.

A better way to think about this statement is to insert the word useable into the sentence. Finished attics and basements – even if considered liveable by local standards – may not be attractive to a buyer if they are not finished to the same standards as the rest of the home.

4. Colors and textures – safe and simple is better.

Keeping a home “vanilla” so buyers can choose their own style and décor might be a safe bet, but it ignores the fact that most buyers just don’t have the ability to visualize the home differently. Without splashes of color and mixtures of texture, sellers can lose value to others that have taken the time to consult with an interior designer.

5. Inside improvements are better than outside improvements.

Not necessarily. If a home’s exterior has been neglected or doesn’t offer a good curb appeal, a buyer might stop there – and then the seller’s efforts on on the inside may not net them any more dollars. To get the biggest bang for their remodeling buck, sellers should start from the outside and work their way in.

6. Adding a bedroom is better than adding a bathroom.

It depends on the starting point. If a seller only has one or two bedrooms to start with, adding a bedroom before adding a second bath is probably a wise choice since most buyers are more attracted to three-bedroom homes. On the other hand, if the home already has three bedrooms and only one bath, the sellers’s next investment should probably be in a new bathroom.

7. Paint hides a multitude of sins.

Dry rot? Fungus damage? Mold problems? Carpenter ants? Termite issues? Nothing a can of paint can’t fix, right? Wrong! Not only does this practice violate disclosure laws in most states, it can set sellers up for liability after the sale, as most buyers will want the sellers to foot the bill for these hidden issues.

8. Converting a garage to living space is a great trade-off.

Nope. A garage conversion is almost always viewed negatively by future home buyers unless the sellers replace the lost garage with another parking and storage space of equal size.

9. Sellers can save money by doing improvements themselves.

For some homeowners, wiring a new lighting fixture or plumbing a new dishwasher is a no-brainer, but for others it may end up costing more later if they have to have the work redone by a professional. Another consideration is local and state laws regarding remodeling work: In many states if a buyer has purchased a home to remodel and resell, they must either hold a contractor’s license or hire a contractor to do the work for them.

10. Pools add value to your home.

This is only true in areas where pools are must-have amenities. In most areas of the country, pools have more limited appeal – and the idea of maintaining a pool for ten months out of the year when it can’t be enjoyed won’t appeal to most buyers.

If you are looking to Buy or Sell real estate in the central Oregon area, please remember that I am here to help.

Co-buying a home

by Mark Rieger, Mark Rieger Realty

 

There are many people who want to own a home, but today’s market has made home buying less affordable for some. Some potential homebuyers have decided to collaborate with friends or family members to Buy a house they otherwise may not be able to afford.
 
Some people find that the advantage of the tax benefits associated with owning a home are worth co-buying with a friend or family member.
 
There are, however, some precautions you should take when considering co-buying a home. Co-buying a home also takes some thoughtful and careful planning.
 
How will you hold title?
 
The decision as to how you’ll hold title is extremely important. It determines who can sign documents and how the property will be transferred in the case of a death of a co-owner. Co-buyers who are not married to each other can share a title as tenants in common (TIC) or as joint tenants with right of survivorship (JTWROS).
 
What are the differences and similarities between TIC and JTWROS?
 
When each co-owner has an equal interest in the home, a JTWROS will apply with one title held among all the co-owners. If a co-owner dies, his or her share will go to the other co-owners. Ultimately, the last surviving owner will own all interest in the property.
 
In a TIC arrangement, there is no right of survivorship. Instead of going to the last surviving owner, each co-owner can pass along his or her ownership through a will. The remaining tenants in common may find themselves sharing ownership of a home with someone they didn’t initially intend to. A TIC can be dissolved when one owner buys out another, the property is sold, or one owner files a partition action to Sell the home.
 
In both a TIC and JTWROS agreement, co-owners have equal rights of possession and each may occupy and use the property. If the home is being rented, each co-owner is entitled to the rental income in proportion to the ownership share.
 
Determine ground rules, and create a written contract.
 
A verbal agreement and a handshake aren’t going to cut it when co-buying a home. While sharing the cost of buying a house can benefit all parties involved, a written agreement needs to be drafted before the transaction is completed.
 
The contract should lay out the relevant concerns of all parties involved. While you may be co-buying with close friends and family members, a written contract is ultimately the only way conflicts can really be resolved aside from court proceedings. Make sure you discuss the contract with an attorney and address the following:
 
Who owns what? All co-buyers need to clearly understand what percentage each owns. If one co-owner dies or decides to Sell their interest, this information is essential. If you take title as JRWROS, you typically divide your interest into equal parts. If you take title as TIC, you don’t necessarily need to divide your interests equally. For example, two of you may decide that one will receive a greater percentage based on having agreed to maintain the property or based on who contributed more to the down payment on the home.
 
What happens if a co-owner wants out at some point? If a co-owner eventually chooses to Sell his or her interest in the property, they can legally do so. However, in the contract, you may want a provision that requires a selling co-owner to give the persons who are staying a right of first refusal to purchase the interest.
 
Who will manage ongoing expenses? Ongoing expenses may include mortgage payments, property taxes, insurance, repairs, utilities, and other maintenance costs. Specify how these expenses will be allocated.
 
Co-buying a home can provide a great benefit to all co-owners, but make sure you proceed with co-buying carefully. Before entering into any co-buyer agreement, discuss it with an attorney.

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