Many senior citizen homeowners are turning to a reverse mortgage to financially help them during their retirement years. Many of these people have lost their pensions, their investments are starting to dwindle and the price of food and everything else is steadily increasing. As a result, they are looking for ways to save money and a reverse mortgage is one major way they can do that.

Reverse mortgages are available to older homeowners who have equity built up in their home. Instead of making a mortgage payment, these homeowners can receive monthly payments or a lump sum payment and they are not required to pay it back unless they sell the home, breach the agreement, move out of the property or die. But is a reverse mortgage right for you? Here are some questions you can ask yourself to determine if you should get a reverse mortgage.

1. Am I eligible for a reverse mortgage? In order to be eligible for a reverse mortgage, you have to be 62 years old or older. You must also live in the home for which you want to get a reverse mortgage as your primary residence and you have to have some equity built up in that home.

2. Will a reverse mortgage benefit me? Before deciding if a reverse mortgage is going to benefit you financially, you may have to crunch some numbers. There are many factors that determine how much money you will receive each month, including the current mortgage rates, your age, the appraisal of your home and more. In many cases, a reverse mortgage may not be the best move financially. It is always best to consult a professional financial advisor before making your final decision because of all the variables that enter into the decision.

3. Do I plan on staying in the home? If you plan on moving out of your home, you may be responsible for paying off the mortgage before moving out. As a result, if you are planning on retiring to a more tropical climate or if you want to move somewhere closer to your grandkids, a reverse mortgage probably isn’t going to be the best situation for you.

4. Do I plan on passing down your home to my children as part of my inheritance? If you have a reverse mortgage, the mortgage company is likely going to take the home and sell it so they can recoup the balance on the loan, or as much of it as possible. In other words, your heirs probably will not be able to inherit the house after your death.

5. What are my other options? The main reason that most people get a reverse mortgage is because they are having financial problems and a reverse mortgage would help them out. But there may be other options that you can utilize before making the decision to get a reverse mortgage. Is it possible to sell your home and downsize to a smaller home with lower payments? Do you have enough equity built up in your home that you can tap into that to get you through your financial problems? Consider all of your options before making your decision. It would also help to consult with a trusted advisor so you know exactly what your other options are.

Getting a reverse mortgage is a great benefit for many senior homeowners. But there are some cases where a reverse mortgage simply isn’t the best decision that you can make.

The foreclosure epidemic in the United States has created a financial debacle for millions of homeowners. Many of them have been forced to move out of their home because they cannot pay their mortgage payments and their options for finding another place to live become narrower once this happens. Many homeowners simply walk away from their mortgage, but the damage to their credit history is huge when they make this decision. But financial problems aren’t the only thing that foreclosures are causing.

Recent reports show that foreclosures are actually causing an increase in crime in the areas where there are many vacant homes. When there are several foreclosures in an area, it affects more than just the families who have moved out of their homes and the lenders who provided the mortgage loan for those families. It affects the entire neighborhood. Vacant homes are a haven for breeding crime. Dan Immergluck with Georgia Tech says that once there are just two or three foreclosures on a block, there are several negative effects that begin to happen in that neighborhood. Crime is one of those negative effects. According to his study, an increase of 2.8 percent in foreclosures in an area corresponded to a 6.7 percent increase in violent crime.

But crime isn’t the only spillover effect that occurs where there are foreclosures. In addition to that, studies have shown an increase of anxiety and suicide attempts. According to the numbers, there is a 30 percent increase in a given zip code for every 100 foreclosures that occur in that area. The stress of making a mortgage payment once a homeowner has lost their job or their income has been significantly reduced can have a damaging effect on their psyche and their health. In some cases, this stress becomes more than a person can bear emotionally which leads some of them to commit suicide as they see no other way out of their financial difficulties. Last year, a southern California father killed his five children, his wife and then himself because he lost his job and his home and he didn’t see any other solution to the problem. Stories like this abound as foreclosure rates continue to climb.

These problems beg the following question: Could lawmakers and government officials use the tragedies of violent crimes and suicides to politicize programs and policies designed to help with the foreclosure crisis? With more than 15 million Americans behind in their mortgage payments and an increase of 14 percent of default notices in the last quarter, it is obvious that the plans and programs that were supposed to help the situation have failed to some extent. With the increase of suicide, violent crimes and other negative impacts on communities and neighborhoods, it seems like the urgency of effective help for troubled homeowners is at an all-time high.

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Cities and communities are looking for ways to effectively deal with the large number of foreclosures that are occurring in their areas. Youngstown, Ohio is one of those communities and the city has decided to take a more radical approach to the problem.

After many attempts to get the city’s economic development off the ground, Youngstown has decided to begin plans to demolish “under-occupied” dwellings, or homes that have been foreclosed on and become vacant as a result. But, in addition to just demolishing the homes, the plans include razing entire neighborhoods – streets, alleys, homes and other structures in order to make way for greener space parcels. These include neighborhood parks, enhanced development tracts and other open-space opportunities.

Youngstown isn’t the only community in Ohio that has implemented this plan. The major city of Cleveland has implemented a similar plan. Cleveland alone has about 13,000 vacant homes due to foreclosures and there are more vacant homes added to the list every day. Cleveland was used as a type of test case because of the number of foreclosures in the city and due the fact that foreclosures quadrupled in about 10 years.

Gus Frangos is in charge of the county land bank which is in charge of making abandoned properties productive once again. This includes foreclosed homes and the land on which they are located. According to Frangos, the best and most efficient way to do this is to this 80 percent of the time is to demolish the structure on the property. This can cost up to $7,500 per property, but it is often still the most cost-effective method for dealing with this problem.

Ohio officials expect that the land bank crews will demolish about 1,000 properties in Cleveland this year. Frangos compares the demolishing of these homes to burying the dead and says that the demolishing will not last forever, but only until the area can be stabilized once again by providing an economic use for the land.

In addition to being a more cost-efficient process, demolishing the vacated foreclosed home helps stop the hemorrhaging when it comes to falling property values in the surrounding area. Having a large number of foreclosed homes in an area can bring down property values for several reasons. For one thing, these homes become dilapidated and run down since nobody is caring for them. The lawns become overgrown and other areas of the home just start looking bad. But foreclosed homes also bring down the property value in an area because it increases the supply of available homes. The most basic concept of economics states that as the supply of a product increases, the demand decreases. As demand decreases, so does the value of that product.

As the number of foreclosures continues to rise throughout the country, one has to wonder if other communities and neighborhoods are going to follow suit. Will your neighborhood or a neighborhood near you be razed to make room for parks and other community amenities?

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As a result of so many foreclosures and a foreclosure system that is overburdened, troubled homeowners are staying in their homes for months or even years without making any mortgage payments. They are simply waiting for the banks and lenders to make them move out legally after going through a foreclosure process. But some states are trying to crack down on this problem and make the foreclosure process go through much faster.

There are currently 26 States that require banks to go through the courts when foreclosing on a home and, in these States, it takes an average or 728 days to complete the process. In the 24 States where foreclosures are not typically handled by the court system, it only takes an average of 550 days to move from the default stage of the foreclosure process to the repossession stage.

Florida is one state where the court system is a part of the foreclosure process and, as a result, foreclosures there take an average of 21 months from start to finish. But, the Sunshine State is now trying to expedite the process. To streamline the process in Florida, some of the state’s legislators are looking at proposals that would keep uncontested foreclosures from going through the courts. These new proposals would allow the banks to repossess homes in much the same way that they repossess cars.

Opponents of these proposals say that the troubled homeowners deserve their day in court if they so choose. State Senator David Simmons says that keeping some foreclosures out of the court system does not solve any problems. He says that the courts need to clear out the backlog of foreclosed homes before any progress can be made on speeding up the process for future foreclosures. In fact, he believes that the banks have been partially responsible for the delay in foreclosures because they simply don’t want to deal with additional properties on their books.

In the case of retirees Neil and Marilyn Strawbridge, the process has not even started. They haven’t made a payment since last year and they still haven’t received a foreclosure notice from their bank. The couple purchased their waterfront home with a pool and three bedrooms 25 years ago but decided to stop making payments when their bank rejected their request for lower monthly payments. The Strawbridges were advised by their lawyer to short sell their home before being foreclosed on which only takes an average of 410 days in Florida, but they have decided to stay in their home until there are legally forced to leave.

If Florida passes legislation to expedite the foreclosure process, other states will probably follow suit. This means that people who are expecting to stay in their home for a year or more without making payments may be in for a rude awakening.

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Among many homeowners who have strategically defaulted on their home mortgage and simply walked away from their financial responsibility, there has been a feeling of calmness as they feel that they have simply rid themselves of the problem. Unfortunately, as many of these strategic defaulters are realizing, that sense that they have felt was a false sense of calm.

When a person walks away from their mortgage, the bank or lender is forced to sell the home in an effort to recoup as much money as possible. But with the housing market the way it is and with the eagerness of the banks to unload these properties, the homes are selling for much less than what is owed on them. In order to make up the deficiency, banks are increasingly obtaining deficiency judgments against the strategic defaulters. The banks then sell these judgments to debt collectors who then aggressively going after these homeowners.

Joseph Reilly of Florida found this out the hard way. He lost his vacation home last year because he stopped paying on the mortgage after losing his job. For many months, he thought the situation was over. But he received a phone call just a few months ago informing him that there was a judgment against him for nearly $193,000, which was the difference between what his vacation home actually sold for and the amount that was owed on it when he defaulted.

There are 41 states that allow banks and lenders to sue mortgage borrowers for deficiencies if they decide to walk away from their payments. While banks had been lenient on defaulting homeowners in the early years of the housing crisis, many banks have decided to exercise their rights to get a personal judgment in order to try to bring in more money that is owed to them, which is quite often $100,000 or more on each foreclosed home that they sell.

While banks are stepping up their efforts to recoup money from borrowers who have walked away, it is still a small number of cases where they sue for their shortfalls. The majority of cases in which they sue for deficiencies occur when they perceive that the borrower was a strategic defaulter and simply chose to stop paying their monthly mortgage payments even though they could still afford to do so.

Even when banks sell these debts to debt collectors, there isn’t much money to be made by the banks. It is believed that the judgments only sell for about two cents for every dollar - which is a lot less than the seven cents on the dollar that debt collectors typically get for credit card debts. For debt collectors, however, the business may be more compelling. Most of the states that allow these deficiency judgments allow collectors up to 20 years to collect on the debt and with an interest rate that is ordinarily allowed to be as high as 8 percent interest rate, the debtors could owe a lot more after just a few years.

If you have been considering doing a strategic default as a way to save money or start over, be aware that banks are being more aggressive than they have been in recent years. Depending on the state you live in and your particular circumstances, you may still be on the hook for the difference between how much you owe and what the bank actually sells the house for after you default on the loan.

If you have a good job, a good credit score and a significant down payment for a home, now is probably the best time to get that house you’ve been wanting because mortgage rates are at all-time lows.

Few people thought it would ever happen, but mortgage rates are now below 4 percent. That’s right – below 4 percent. For the average 30-year fixed mortgage, buyers who qualify can expect to pay 3.94 percent over the term of their loan. That’s a 0.07 percent drop from last week’s 4.01 percent, which was also a record low. If you’re looking for a 15-year fixed rate mortgage, the news is even better. Qualified applicants can expect to pay 3.26 percent.

Today’s mortgage rates are even lower than they were during the early 1950s. During that time, the lowest rates stood at about 4.08 percent. That was when most mortgage terms were only 20 to 25 years.

Although mortgage rates have only been above 5 percent for two weeks in the past year, it hasn’t been enough to bring the housing market out if its slump. The sales figures for existing homes this year are predicted to be the worst figures in more than a decade. In addition to that, the number of people who own homes in the past decade is at its lowest since the Great Depression.

According to Celia Chen, the director of housing economics at Moody’s Analytics, there is an expectation that there will be more people buying homes and refinancing their current mortgages. But with the lack of jobs and the difficult underwriting standards, the number of new homeowners probably won’t increase by much despite the unbelievably low mortgage rates.

John Stearns, a senior mortgage banker at one of the national banks, said that his bank has been rejecting huge piles of applicants in recent years because of their low credit scores. Banks haven’t only been insisting on higher credit scores, but they have also been requiring at least a 20 percent down payment on homes for first time home buyers in order to even be considered for a mortgage loan. Mike Anderson, a mortgage broker in Louisiana, said the low rates still haven’t changed the obstacles that are preventing people from getting home loans. If you don’t have a job or a good credit score, the mortgage rates could be 0 percent and it still wouldn’t matter because of the strict qualifying standards.

The average mortgage rates aren’t the only thing that has declined in the past week. The number of mortgage applications has also dropped by 4 percent when compared with last week’s numbers. The number of people applying to refinance their home has also fallen by about 5 percent.

Still, the lower mortgage rates could help the economy if a large number of current homeowners decide to refinance their home. By paying a lower interest rate, they can spend more money each month which puts more money into the economy. A person with a $250,000 at 5.09 percent for a 30-year term can save about $2,000 each year by refinancing at today’s low mortgage rate.

This opportunity to take advantage of these low mortgage rates is probably a once-in-a-lifetime opportunity. It’s too bad that so few people can take advantage of it.

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An article in USA Today recently reported that there is a new trend in the mortgage industry. That trend is that many parents are financing the mortgage for their children. According to the article, family mortgages work well if your children are responsible and trustworthy.

Many parents are seeing that they can benefit themselves and their children by financing their mortgage. In the case of the Driscoll family, Dan Driscoll had his parents financed his mortgage in 1991. At the time, he could only qualify for a mortgage rate of 9 percent. His parents were only earning 3 percent on their savings. So they came to an agreement that Dan would pay his father a 6 percent interest rate if his father financed his $75,000 mortgage. These days, Dan is financing his son’s mortgage like his father did for him 20 years ago. As a result, his son is saving money on his interest rate, closing costs and other fees.

Having your parents finance your mortgage may work out in many situations. But how do you both come to an agreement and prevent that loan from coming between you? If you are a parent financing your child’s mortgage or if you are a home buyer looking for financial help from your parents, here are some things you should both keep in mind.

1. Get everything in writing. More cases end up in court because of a misunderstanding. A person loans someone money and they both have different ideas of the repayment requirements. Even if it’s family, you should have everything in writing just so everybody understands the repayment requirements.

2. Make sure you can afford it. If you are loaning money to your child or financing their mortgage, you should be in a financial situation where you can afford to take the loss if your child ends up not paying. If you are putting up your entire life savings to finance your child’s mortgage, you should probably reconsider.

3. Communicate. The biggest thing you should remember is that communication is essential. If your child is married, make sure their spouse is included in the discussion and the decision. You and your spouse should also be in complete agreement. Discuss all the details of the agreement so everybody involved has a voice in the situation.

4. Realize the precedent that you are setting. If you are going to finance the mortgage for one of your children, are you going to finance the mortgage for your other children? Will it cause bad feelings if you have children who already have a mortgage? As parents, you should consider the message you are sending to your other children if this happens.

5. Don’t make it personal. Too often when parents loan money to children, the relationship is changed. Make an agreement to keep the business side of the relationship different from the personal side of the relationship and stick to it. This will help save a lot of fights, arguments and hard feelings.

If you are going to finance your child’s mortgage or if your parent is financing your mortgage, be sure it is the best thing to do. It can be a win-win situation, but it can also cause problems in the relationship if you’re not careful.

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