Latest news with #homeOwnership
Yahoo
04-07-2025
- Business
- Yahoo
Reverse Mortgage Guide for Ages 62+: Could You Benefit From This Loan?
With rising costs and high interest rates these days, home ownership can be tough for many people. This can be especially true for seniors, who may be on a fixed budget. Thankfully, there is an option for older adults to help improve their financial situation: a reverse mortgage. Not sure what this home loan entails? Find out more about the requirements of reverse mortgages, who can benefit from the loan and what to consider when deciding if it's the right fit for you. Also known as a Home Equity Conversion Mortgage (HECM), this is a special type of home loan designed for homeowners who are 62 and older. Unlike traditional loans, borrowers don't make monthly payments with a HECM, according to Instead, the loan gets repaid once the borrower no longer lives at home. It's called a reverse mortgage because the amount owed goes up—not down—over time since interest and fees raise the loan balance. Even though mortgage payments are not paid monthly, property taxes and homeowners' insurance are still required. Though it may sound like free money to live in a home, the loan does need to be paid back eventually. This can be done by the homeowners or the heirs, and it's usually done when you sell the home. Though the mortgages are designed for those above the age of 62, not everyone will benefit from one of these options. 'Retirees who are committed to living in their home for at least the next few years are the best candidates for reverse mortgages,' says Michael Brennan, president at Nationwide Mortgage Bankers. 'It should be your primary residence, and it's important to continue staying on top of all your other home payments: property taxes, insurance and just making sure your home stays in good condition.' But this non-traditional mortgage can also potentially help those who want to be able to stay in their current home despite some financial setbacks. 'I've seen reverse mortgages be the only way that a homeowner was able to keep their home, and receive income from their home, which saved them from having to find a new home,' adds Patricia Taffs, mortgage loan officer at Wasatch Peaks Credit Union. 'For that reason alone, I think a reverse mortgage is a great option for anyone to explore when budgeting issues are a primary concern in retirement.' The funds from the reverse mortgage can help to pay off an existing mortgage and eliminate the monthly payments. This frees up money so you only have to focus on taxes and insurance. Considering applying for the unique mortgage? The experts say it's important to know about the advantages and drawbacks that come along with this type of loan. As mentioned above, if you use this type of loan to pay off the current loan on your property, it can put you in a better financial standing. 'Reverse mortgages are one of the best financing tools on the planet, in my opinion,' shares Brennan. 'The best part about them is that you're converting a portion of your home's value into tax-free dollars without giving up ownership or needing to make monthly mortgage or interest payments.' Plus, because you're no longer making those monthly payments, it may even help you bring in money. 'Depending on the equity in the property, the loan could also provide additional monthly income to the homeowner,' adds Taffs. While a reverse mortgage can be appealing, experts do caution that people should be aware of the extra requirements that accompany the loan. These include: High up-front fees, including closing costs, service fees and an origination fee. Additional education is required as part of the loan process. You must remain the primary resident to keep the loan You cannot owe any federal debt Your home must be in good shape Because of all of these factors, it's important to consider if you actually need a reverse mortgage. Otherwise, it may be more trouble than it's worth. 'They can be expensive to do, and if there isn't necessarily a need for consistent additional monthly income, or the elimination of the current mortgage entirely, then there may be other options to secure a source of 'emergency' funds for the home, like a HELOC,' advises Taffs. As long as you are at least 62 years old and meet all of the requirements for a HECM loan, you can begin comparing lenders. Doing some research can ensure you get the best deal possible. 'The requirements and processing of reverse mortgages are the same, no matter which lender you choose, but the interest rates can be different from one lender to the next,' assures Taffs. You'll need to meet with a Housing and Urban Development (HUD)-approved mortgage counselor before moving forward, but then it's up to you to submit the application to your chosen lender. If approved, the process resembles that of any other mortgage loan with the necessary appraisal and underwriting. Once the loan closes, you can reap the benefits of your new reverse mortgage! Your Credit Score Still Matters in Retirement—Here's How to Maximize and Protect It When Should I Apply for Social Security? The Factors to Consider When Opting to Receive Benefits Senior Discounts: Find Out How to Use Them to Save Money on Travel, Retail, Restaurants and More Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Guardian
24-06-2025
- Business
- The Guardian
Interest-only mortgage could make comeback as regulator revisits rules
They were once called a 'ticking timebomb' but interest-only mortgages could become easier to get hold of as the Financial Conduct Authority (FCA) looks at ways to support home ownership. Interest-only mortgages were hugely popular but almost became extinct following the 2007-08 financial crisis, with some viewing them as one of the worst examples of irresponsible lending. But in a discussion paper on the future of the mortgage market, the FCA said it would like to hear views on 'whether our rules could better support more interest‑only mortgages'. It added: 'Interest‑only mortgages could be suitable for consumers who may struggle to afford a repayment mortgage and can support sustainable home ownership.' Its seemingly supportive words may suggest that, like 100% mortgages, which also largely disappeared after the financial crisis and are starting to pop up again, these contentious deals could be heading for a comeback. With a fully interest‑only mortgage, the borrower only pays the interest on their home loan, 'substantially reducing the contractual monthly payment and potentially making the mortgage more affordable', said the regulator. There are also so-called 'part and part' mortgages where a chunk of the loan is interest-only and the rest is on a repayment basis. One big problem with pre-financial crisis interest-only loans was that many were taken out without proof borrowers could pay off their debt. In 2009 the FCA's predecessor regulator officially labelled them as 'high-risk' and, in 2012, it called them a 'ticking timebomb'. The FCA now expects lenders to ensure there is a 'credible repayment strategy' for paying back the capital at the end of the mortgage term. Interest-only home loans are available – they made up 4.5% of regulated mortgage sales in 2024, compared with 39% in 2007 – though they are mainly used by buy-to-let landlords. They are also available as a niche product aimed at people in certain generally higher-earning professions such as barristers, accountants, investment bankers and vets. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Despite their tainted image, many experts have maintained that these loans remain right for certain people and, only this week, a lender called Gen H announced the staged launch of a new interest-only offering. It said this type of deal 'can spell the difference between staying locked in the rental cycle or accessing home ownership and building meaningful wealth over time'. In its discussion paper, the FCA said: 'Interest‑only mortgages can be a flexible way for consumers to engage with the property market … We could, for example, explore circumstances in which borrowers could more easily shift between repayment and interest‑only during the mortgage term without having to set up a repayment vehicle.'
Daily Mail
24-06-2025
- Business
- Daily Mail
First-time buyers offered interest-only mortgages: Is it a bad idea?
First-time buyers with at least a 20 per cent deposit can now buy with an interest-only mortgage. The lender, Gen H, claims it will help make home ownership more affordable, and help those who want to to escape the rental market. However, some mortgage experts have voiced concerns about whether borrowers will have the financial discipline to come up with a repayment plan. We explain how the mortgages work, run the rule over the rates and ask mortgage experts what borrowers need to look out for. What is an interest-only mortgage? As the name suggests, home owners only pay the interest each month, with the loan amount remaining the same. This differs from a typical repayment mortgage where the borrower pays back a part of the loan, as well as the interest, each month until they eventually pay off the mortgage. With interest-only, the monthly payments will be lower - but the full amount borrowed will still need to be repaid. Borrowers can do this during the term by making voluntary overpayments, subject to certain limits. But if they don't, the whole amount will need to be repaid at the end of the mortgage term. If the borrower doesn't have the means to do this, it often means they must sell the home to pay back the bank. How popular are they? Interest-only mortgages were popular among home buyers in the 1980s and 1990s, often sold alongside endowments - investment schemes which promised to grow enough to pay back the loan by the end of the term. But their popularity waned as some of these endowments failed to make the promised returns, leaving borrowers in the lurch. The rules on interest-only mortgages were then tightened in the aftermath of the financial crisis. Today they are mostly used by buy-to-let landlords, as they allow them to keep hold of cash which they can invest in growing their portfolio. Another group which often makes use of them is wealthy and financially savvy borrowers - for example those who get big bonuses, and want to be able to pay off their mortgage in large but irregular chunks. Gen H's move comes at a time when interest only mortgages for home buyers are very much in retreat. The total interest-only mortgage stock fell by 17 per cent in 2024 and has reduced by 78 per cent in number since 2012, according to data last week from UK Finance. There were 541,000 pure interest-only homeowner mortgages outstanding at the end of 2024, 18.5 per cent fewer than in 2023. Who is Gen H's product for? The lender says the new mortgage is aimed at professionals and self-employed first-time buyers who would benefit from lower monthly payments, but also have a solid repayment strategy for the loan. Pete Dockar, chief commercial officer at Gen H says that, in this scenario, an interest only mortgage can create the equivalent of a 10-15 per cent boost in affordability over a 30-year term. This, he says, can be the difference between continuing to rent and owning a home of your own. 'Housing affordability challenges are here to stay, and helping everyone access homeownership and build long term wealth requires us to consider how familiar tools can be used in new ways,' said Dockar. 'Interest only is a perfect example – it has long been considered a tool for the rich, but as one of the UK's only lenders creating truly incremental homeowners, we believe it can support first-time buyers as well. 'An interest only mortgage can spell the difference between staying locked in the rental cycle or accessing homeownership and building meaningful wealth over time.' Who can apply and what are the interest rates? Buyers will need at least a 20 per cent deposit and a minimum household income of £50,000 per year to be eligible. Rates will vary depending on the size of their deposit. Those buying with a 20 per cent deposit can secure a five-year fix at 5.38 per cent, or a two-year fix at 5.44 per cent - both come with a £1,499 fee. Someone securing the five-year deal at 5.38 per cent rate could expect to pay £896 per month. These rates are more expensive than those that would be offered on an interest-bearing mortgage. The cheapest two-year fix for someone with a 20 per cent deposit is currently around 4.15 per cent. With Gen H, someone buying with a 40 per cent deposit can secure a two-year fix at 5.09 per cent or a five-year fix at 5.33 per cent - both with a £1,499 product fee. On a 5.09 per cent, £200,000 interest only mortgage, someone could expect to pay £848 a month. Gen H says the term can go to the eldest borrower's 75th birthday or retirement, whichever is earlier. Like with any normal interest-only mortgage, borrowers will need to confirm how they intend to pay off the loan at the end of the term. Selling the property in the future is an acceptable reason. It can also come from the sale of other properties, pensions, investments and endowments - but proof of funds will be required in each case. Is it a good option for first-time buyers? Interest-only mortgages are often considered to be best-suited to financially savvy and experienced borrowers, who have a plan to pay off the debt. Gen H, like most mortgage lenders, allows borrowers to make overpayments up to 10 per cent of the total mortgage amount each year without incurring penalty charges. The concern will be whether buyers will have the financial discipline to make overpayments. There is also a case that borrowers won't be that much worse off by opting for a repayment mortgage with a lower rate. Depending on the mortgage term, borrowers could find they are actually paying more each month. For example, the lowest two-year fixed rate mortgage for someone buying with a 20 per cent deposit is 4.14 per cent, with a £1,495 fee, from the Bank of Ireland. If someone fixed a £200,000 mortgage on this deal on a repayment basis over a 35- year term they could expect to pay £902 a month. Meanwhile, a £200,000 interest only mortgage on Gen H's two-year fixed rate of 5.44 per cent would cost £907 a month. What do the experts say? Mortgage brokers and financial experts are divided over Gen H's interest-only proposition. Ross Lacey, director and independent financial adviser at Fairview Financial Management says: 'We think interest-only certainly has a place in the residential mortgage market. 'We deal with many clients who already qualify for interest-only mortgages given their level of earnings and the lower loan-to-value borrowing they are looking for. 'We're in a different world now. Interest-only repayment vehicles and the assessment of them are much more stringent and realistic compared with days gone by when an endowment with an unrealistically high maturity projection was relied on.' However, Simon Bridgland, a broker at Charwin Private Clients is concerned that it could turn into a future horror story. 'Whilst in theory interest-only is a super affordable option for home buyers, users should walk into it with a little fear and trepidation,' he warns. 'History books are still being written about the very real tale of homeowners close to or at the end of the mortgage term with no viable option of loan repayment. 'Things that are totally out of the borrowers control will trash career plans and incomes intended for long term repayment strategies. 'Gen H will need a very tight leash on things if it isn't to turn into a future horror story.' Best mortgage rates and how to find them Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs. That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
Yahoo
20-06-2025
- Business
- Yahoo
Will Trump launch a new first-time home buyer tax credit?
: We are monitoring government moves regarding the first-time home buyer tax credit and will update this page as necessary. Now that the presidential election has been decided, speculation is bubbling up about a possible revival of the first-time home buyer tax credit. While Kamala Harris had promised to offer $25,000 in down payment assistance to prospective home buyers to recharge the housing market, Donald Trump remained mum on the campaign trail regarding any similar incentive. However, there were hints provided about potential plans in Republican campaign documents. With the Federal Reserve rate and mortgage rates holding firm, the housing market is wound tight with stifled demand. Will the new Trump administration find a way to relieve the pressure? This embedded content is not available in your region. The Republican 2024 platform stated that tax incentives and other support for first-time home buyers — as well as opening portions of Federal Lands to new construction while reducing regulations — would boost home construction and ownership. The Republican roadmap also said that "slashing inflation" would reduce mortgage rates. Donald Trump has also expressed an interest in steering the Fed's monetary policy in an effort to lower mortgage rates. The goal: to get home loan rates back down to 3%, "maybe even lower than that," Trump has said. The original first-time home buyer tax credit was created by Congress in 2008 and ended in 2010, though service members and some federal employees had an extra year's eligibility for the tax credit. Providing a tax rebate on income taxes owed, it allowed a credit of up to 10% of the home purchase price on a principal residence to a maximum of $8,000. The IRS defined a first-time home buyer as someone who had not owned a house in the three years before the purchase of the home the tax filer was seeking the tax credit on. With a federal tax break currently nonexistent, first-time home buyers can explore possible mortgage credit certificates in their state. MCCs are issued by state housing finance agencies and allow home buyers to take a portion of the mortgage interest they pay annually as a federal tax credit, up to a $2,000 limit. The tax credit can range from 10% to 50% of the mortgage interest paid annually on a primary residence. MCCs are subject to income limits and other restrictions set by a state housing finance agency and primarily serve low- to moderate-income households. Once approved, the home buyer receives a credit certificate applied to federal income tax owed on their tax return. Find information on the housing finance agency in your state. Some cities, counties, and states also provide down payment assistance programs, reduced interest rates and grants to qualified first-time home buyers. State housing finance agencies and the Department of Housing and Urban Development can help you find these home-buying assistance programs. You can also search your local municipality's website for mortgage programs where you live. Income limits, location, credit score requirements, and other restrictions may apply to these grants, loans or down payment assistance programs. First-time home buyers are often eligible for loan programs tailored to their needs. One of the most important benefits includes lower down payments: Conventional loans offer down payments as low as 3%. FHA loans offer down payments as low as 3.5% for credit scores as low as 580. VA loans and USDA mortgages offer no-down-payment programs. VA loans are for military personnel and their families, while USDA loans are for low-to-moderate-income borrowers in rural areas. The best mortgage lenders for first-time buyers will also help you find loan and assistance programs that you may qualify for. While it is of no help in clearing the hurdle to homeownership, once you are settled in, you can look forward to long-held tax breaks still in effect. The tax benefits include deductions on discount points and origination fees paid during the loan process, as well as a mortgage interest deduction and a tax deduction on the property taxes you pay as a homeowner. There are also tax incentives for energy-efficiency home improvements and more.
News.com.au
17-06-2025
- Business
- News.com.au
More first-home buyers bite the bullet as market confidence swells
More first-time buyers are taking the plunge on home ownership with loan applications surging 16 per cent at one of Australia's big four banks. Victoria is leading the way in first-home owner activity, recording a 28 per cent jump in lending since February, new NAB data shows. It's followed closely by Western Australia, up 22 per cent, and Queensland, up 21 per cent. Overall, lending to all owner occupiers increased by almost a third nationwide since the Reserve Bank delivered its first rate earlier this year. Surprise source of home deposits exposed Geelong children's librarian Charlotte Dru Ziegeler is one of a growing number of first-home buyers re-entering the market as conditions improve. The 33-year-old recently purchased a house in the seaside Bellarine Peninsula town of St Leonards, near where she grew up. She said had been watching the market and wasn't sure if her deposit would be enough to purchase a home but was encouraged as variable home loan rates started to fall. 'I spoke to a banker, got pre-approved in less than an hour and then, not long after, the right house came up,' Ms Dru Ziegeler said. 'It all happened so fast, it was really exciting, and a huge 'pinch me' moment.' She moved in just six weeks after kickstarting the process, becoming the first of her siblings to buy a house. NAB home lending executive Denton Pugh said cuts to both fixed and variable home loan rates were enticing more first-home and other buyers to re-enter the market. 'We're seeing momentum return, especially with people like Charlotte who've been saving or waiting for the right time to take heat jump into home ownership,' Mr Pugh said. 'And that momentum could carry through winter, which is usually a quieter time with less sellers listing over the cooler months.' He said despite the rate cuts, borrowing costs remained high but this worked in favour of first-home buyers by keeping a lid on property price rises. Buyers' advocate Cate Bakos said first-home buyers were sensing that now might be their chance to get a foot in the door. 'I think it's driven by a few factors. There's a bit of FOMO, sure, but more than that, it's optimism,' Ms Bakos said. 'The federal election is out of the way, interest rates look to be on a downward path, and that's creating a window of confidence.' She said the expansion of the First Home Guarantee scheme had been a game changer for some of her clients, while other were co-buying with their parents or siblings. 'Victoria, in particular, has been a more accessible market for first-home buyers lately,' she said. 'Investor demand here has been softer compared to other states, which has opened up more opportunity.'
