Any home that is gone through the fore closure process and is now the property of the bank, is a bank owned home. This happens when homeowners have defaulted on their mortgage loan, which gives the bank every right to foreclose their property and then put t up for auction to recover what was supposed to be originally paid against the collateral.
There are a number of benefits buying a bank owned property.
Buying property is one of the biggest headaches since you have to deal with a number of agents and listings, not to mention homeowners and new constructions. But when you buy any property from the bank directly, you only deal with the bank. Banks are trying to recover their money which was due, but they had to settle for foreclosing the home because of mortgage default. Thus there is no value attachment to the said property on part of the bank, unlike some homeowners who want to sell the house but are not willing to at the earliest. The reason being they still, have an emotional attachment to the property and tend to linger on to create problems or even sometimes threaten with legal action.
Foreclosed properties might be in dire conditions since the main reason it was being foreclosed in the first place was because the owners were not able to keep up and meet with their financial commitments. So there is a good chance that, the property might be in need of major repairs. The good thing is that you can request for a full thorough inspection of the said property before even thinking about signing a deal, wherein you can estimate the cost of repairs to be done and the time it might take for the said repairs.
Getting a good deal on bank foreclosed properties is easy because the properties will be priced at below the market value, some might even be decent enough to move in at a short notice. Normally the banks asking price for the said foreclosed property will be less than what the value might be outside on the open market.
Since the previous owners were in financial turmoil when their property was being foreclosed, chances are they might have not been able to pay off any property taxes for a while. This does not necessarily mean that you will have to pay for those expenses, banks tend to waive of these charges which turns out to be a very good deal for you.
A reverse mortgage is a type of loan that allows homeowners to receive payments on their house as opposed to them making payments to the lender. At first glance, this option seems too good to be true. But, before committing to it, there are some nitty-gritty details that people must consider when opting for this type of financing. So, here is some information regarding the pros and cons to consider when getting a reverse mortgage.
Advantages
Disadvantages
A reverse mortgage is a loan that allows individuals older than 62 to improve their financial well-being. They can convert part of their home equity into lump sum cash, fixed monthly payments, or line of credit, according to their preference. The money can be used to pay for medical bills, in emergencies, or to pay off a mortgage. Here’s what you should know about reverse mortgages in case you’re looking for one.
How much can you borrow?
For reverse mortgages, the loan amount can’t exceed the value of the property against which it is borrowed. Federal regulations require lenders to ensure that the loan amount doesn’t exceed the value of the house by structuring the transactions accordingly. Additionally, these regulations state that the owner/borrower is not liable to pay off the balance amount in case it exceeds the property value.
How are reverse mortgages paid for?
A reverse mortgage is payable when the borrower sells the house, relocates permanently, or dies. Unlike forward mortgages, reverse mortgages don’t need the borrower to make any monthly payments. They are only liable to pay interest on the money received, which is rolled back into the loan balance. While the owner gets to keep the title to the home, their home equity reduces over the loan tenure.
Who can take a reverse mortgage?
This type of loan is ideal for seniors and retirees whose net worth comes mostly from the value of their home. Seniors who don’t qualify for a home equity loan or can’t refinance due to limited cash flow or poor credit can opt for reverse mortgages. Home Equity Conversion Mortgage (HECM) for purchase is a reverse mortgage that allows seniors to buy another property. That said, it is complex, and you should study the risk factors before getting one.
What are the risks associated with reverse mortgages?
Reverse mortgage scams are not unheard of. Unreputable vendors could offer to help seniors secure reverse mortgages by undertaking house repairs. They don’t provide quality results and get away with the homeowner’s money instead. For spouses living together in a home with only one spouse named as a borrower on a reverse mortgage, the other spouse can lose the home if the borrowing spouse dies first. Besides, reverse mortgage lenders charge fees and closing costs and may also charge mortgage insurance premiums for federally-insured HECMs.