Tag: home buying

Home loans: a traditional versus a reverse mortgage

Home loans: a traditional versus a reverse mortgage | H is for Home

When you retire, you become eligible for a different type of home loan. That loan can make your retirement more comfortable, potentially. It’s called a reverse mortgage. The question is can you really benefit more from a reverse mortgage than from a traditional mortgage? There are several ways in which the two types of home loans are similar, but there are also several major differences. You need to compare and contrast the two before deciding.

Mortgage word cloud

“Mortgage Cloud” by Got Credit is licensed under CC BY 2.0

Both traditional and reverse mortgages involve borrowing against your home equity

To get a traditional mortgage or a reverse mortgage, you must own your own home. That is because both are methods of accessing the equity, or cash value, of your home. That means you must have a home to get a mortgage of any type. Also, your home must have some real value to borrow against in either case.

Green pocket calculator with the word 'mortgage' in LED

“Mortgage” by Got Credit is licensed under CC BY 2.0

Both traditional and reverse mortgages provide you with quick cash

Another similarity is either type of mortgage agreement will provide you with quick cash. However, a standard home loan usually provides you with a lump sum. A reverse mortgage offers that option, but receiving ongoing monthly instalments is also a popular option. You can also choose to borrow only when you need certain amounts of money with a reverse mortgage by opening up a home equity line of credit.

Reverse mortgage and little house drawn on a blackboard

“Chalkboard Reverse Mortgage” by aag_photos is licensed under CC BY-SA 2.0

A reverse mortgage is a longer type of home loan

One major difference between a traditional mortgage and a reverse mortgage is the length of the loan agreement. You might take out a regular home loan for a relatively short period of time, such as three or five years. A reverse mortgage is meant to last much longer. You owe no portion of it back early in the agreement, and the loan stays active for as long as you remain living in the location. That means a reverse mortgage agreement can last for a non-specific period of time somewhat within your control. However, one of the possible disadvantages of reverse mortgages is a lengthy loan agreement creates more debt to eventually pay back. That is because the loan continues to accumulate interest over time.

Retirement nest egg illustration

“Retirement Savings Egg” by aag_photos is licensed under CC BY-SA 2.0

A reverse mortgage is only available when you retire

You can get a traditional home loan at any stage in your adult life, as long as you meet all qualifications. However, you can only obtain a reverse mortgage after reaching 62 years of age. Perhaps this is a time in your life where you’re thinking about refinancing your mortgage. The reason is the reverse mortgage was specifically developed as a response to the unique financial challenges associated with retirement. When you retire, you may not have the financial stability to survive without taking out a mortgage on your home. At the same time, you may be unable to afford to make traditional mortgage payments. A reverse mortgage doesn’t require you to adhere to a schedule when repaying the loan.

Piggy bank with reverse mortgage graph on a blackboard in the background

“Reverse Mortgage Piggy Bank” by aag_photos is licensed under CC BY-SA 2.0

It is more difficult to default on a reverse mortgage

Another difference between standard and reverse mortgages is the ways in which you can go into default, or violate the loan agreement. With a standard mortgage, you risk eviction if you miss payments. A reverse mortgage comes with no such risk because payments are not scheduled to begin with. However, it is still possible to violate your reverse mortgage agreement.

Your reverse mortgage agreement will require you to live in the home on a full-time basis. It will also require you to be capable of taking care of property maintenance, including payment of property taxes. If you fail to meet those obligations, file for bankruptcy, or move out of the home, the agreement will be violated. At that point, whatever amount you still owe will become due.

Illustation showing retirement cash in a jar

“Retirement Savings” by aag_photos is licensed under CC BY-SA 2.0

A reverse mortgage protects your other assets

A reverse mortgage is also popular retiree option because it is possible your home can be sold if you cannot pay the balance eventually, but your other assets are protected. For example, your cars or other property cannot be confiscated to cover the debt. Only the home itself is at risk, and only when you move or otherwise violate your loan terms without paying the full amount owed.

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The pros & cons of new-build homes

If you’re planning on moving house, you’ll probably see lots of options on the market. These days, there are so many new housing developments offering loads of new-build homes. So, your options are more diverse than ever before.

The question we want to tackle is; should you buy a new-build home, or go for an older one? There’s no definitive answer, but we can look at the pros and cons of new-builds:

Upside-down facade on a house

Pro: Modern designs

Obviously, new housing developments have the benefit of being modern. Everything is designed to be on-trend, so you get a house with excellent interior and exterior design. With pre-owned homes, you may inherit some interior design from the 80s, meaning you have a big job on your hands making it look modern.

Cladding on a new-build house

Pro: More energy efficient

Another critical advantage of new-builds is that they’re built to current energy standards. As a result, you get a home that’s more energy efficient than a lot of old-builds. It retains more heat, meaning your spending on energy bills will be lower.

Wood-clad modern houses

Pro: Less effort involved in moving

The downside of older homes that have been sold by someone else is that it takes longer to move in. You have to get all your stuff ready, then the previous owners have to move everything they own out as well. With a lot of new-build homes, the companies behind them make life easier for you. You can find Redrow Housing Developments with properties that are ready for you to move straight into. So, it’s just a case of getting your belongings together and moving in. Instead of the process taking a few months, it could take only a couple of days!

New-build house with for sale signage outside

Con: More expensive

Perhaps the key disadvantage of new homes is that they’ll be more expensive than their older counterparts. This is simply because they’re more modern, and no one has lived in them before. So, if you’re buying a house on a strict budget, it can sometimes be hard to find a new development that fits your requirements and your budget.

Purpose-built, multi-storey flats

Con: Harder to get a mortgage

The fact that a lot of new builds are more expensive than older properties means it’s harder for you to get mortgages for them. Usually, lenders ask for larger deposits because the house price is so high. As such, you might not be able to pass the application requirements to get the loan you need.

Wooden framed house being built

Con: Homes aren’t always built

While some new properties are already built and ready for you to move into, some might not be. You could buy a house, then have to wait for it to be constructed and prepared for you. Of course, this all depends on the specific home you’re buying. If you only look for new-builds that are ready to move into, then it won’t be an issue.

New housing developments have their fair share of pros and cons. Ultimately, it comes down to your budget, where you want to move, and how fast you’re hoping to move.

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A guide to buying a home abroad

A guide to buying a home abroad | H is for Home

It’s often a complicated enough process buying property locally. When you buy abroad, this opens up all kinds of new complications. That said, it doesn’t have to be stressful – with the right amount of organisation and help, you can make buying a home abroad easy. Here are ten tips for buying overseas.

Holiday home with infinity pool

Define your long-term goals

First you need to decide what your property will be used for. Is it a home in which you live out the rest of your days? Or do you plan to sell again in a few years’ time? Is it a second home to use as an investment – and if so do you plan to rent it out to tenants, rent it out to people on vacation or simply do it up and resell it?

Having a clear understanding of your goals will help you to find the right property and the right mortgage. It may even help you to determine whether buying a property is the right decision after all – if you’re only staying abroad for a couple years, renting may be an easier option.

Searching for an international mortgage

Shop around for the right mortgage

In most cases, you’ll need to take out a foreign mortgage in the country in which you’re buying. This has to be paid in foreign currency (although some lenders may give you the backup option of paying in your home currency if you aren’t able to meet payments due to a disaster).

There may be different mortgages for different types of purchase. For example, a vacation home may need a different mortgage to a property you plan to use as your primary home. You may want to read guides to foreign mortgages such as this Expatica guide to Spanish mortgages to better understand your options.

Currency exchange rates with Euro cash

Be wary of fluctuating currency rates

A big issue when buying a property abroad is the different currency rates. When paired with a variable mortgage, it could make payments very hard to predict each month. Make sure to keep an eye on currency rates to get an idea if your currency is rising or falling. This could allow you to pull out early if need be, rather than waiting it out until the mortgage is so high that it’s practically unpayable.

Income tax workings out

Research into taxes

Property tax laws are likely to differ abroad. Some countries may have a land tax whereas others may have capital gains tax when selling. Meanwhile, if you’re renting out owned property to tenants, the income you’re earning will have to be taxed, which could differ depending on the country in which you reside. Researching into these taxes could ensure that all these taxes are correctly paid and that you don’t get caught out by an unexpected tax bill.

Two people discussing a legal contract

Hire legal and financial help

If you’re already getting scared by the idea of different currency rates and different property laws, don’t worry – you can always hire advisors to help you. A legal advisor could be useful for helping you to understand foreign property laws as well as handling the paperwork and checking that everything is legitimate. A financial advisor meanwhile may be able to help you get a mortgage and may be able to help you with taxes and currency conversions. In both cases, you may want to hire international specialists such as this international law firm. Having them to guide you through the process could offer peace of mind.

Multi-language dictionaries

Consider hiring a translator

When buying property in some foreign countries, hiring a translator could be handy. This could be to deal with agents or translate paperwork. International financial and legal advice firms may already have translators they can call upon for you.

Transport lorry on a road

Consider if any other professional help is needed

Other professionals may come in handy during the process. To check the property for signs of damage and risks of future repair bills, it could be worth hiring a surveyor. You may also have to consider an international moving company if you’re moving your stuff over there. As for a property that you hope to rent out, you may want to consider hiring a property ladder to clean it and maintain it, as well as handing over keys. All this will need to be considered when working out your budget.

Searching the internet using Google

Use the internet to your advantage

The internet can be a big help every step of the way. Listing sites such as these rumah dijual di Indonesia could save you having to fly out and look round local estate agencies. It may even be possible to do property viewings over Skype. That said, you may feel that you still want to visit the property in person before buying.

Two people speaking over a map

Research the neighbourhood

It’s important that it’s in the right location. Do your research into the neighbourhood both by visiting the location in person and by doing digital research such as looking into local amenities, crime stats and school pass rates.

Man tying up paperwork

Make sure paperwork is supplied

The purchase of your new property should come with all the correct paperwork. This paperwork needs to be legally water tight. This is something that you’ll want your legal advisor to check.

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How to reduce the cost of buying a home

How to reduce the cost of buying a home

Are you considering moving to a new house but aren’t keen on the costs that come with it? If the answer is yes, you might be pleased to know that just because buying a house can be expensive; it doesn’t necessarily have to be. The truth is that you can buy property without it breaking the bank, it’s just a case of taking steps to minimize the amount that needs to be spent.

When you invest in property, whether it’s to live in or to rent out to make a profit from, there’s usually a range of fees that come with the purchase. In addition to a variety of other costs. However, just because these costs can be high, they don’t have to be. Want to reduce the cost of buying a home? Below is a list of useful tips that it is worth implementing in your property purchasing search, to help reduce your buying costs.

House shaped from £20 notes

Take out a 95% mortgage

One of the most significant costs that comes with purchasing property is the cost of the deposit. To be accepted for a mortgage loan, usually a 25% deposit is required, sometimes even more than that. This is a lot of money and can be one of the highest costs associated with buying property. However, the good news is that there are 95% mortgages that you can consider taking out. These are mortgages where you only need a five percent deposit, rather than a 25% one. Not all mortgage companies offer these types of mortgages and not everyone is eligible for them, but if you take the time to do your research and shop around, you may be able to successfully apply for this kind of mortgage and save yourself thousands.

Mortgage document

Save on the cost of fees

Another high cost that is associated with purchasing property is the cost of covering the fees that come with buying a property. These can run into thousands and are usually incredibly high in price. Platforms like OwnUp have been created to solve this problem. However, there are steps that you can take to reduce the cost of these. One of these steps is by using the Open Listings websites to house hunt, make offers online, and securing a 50% commission refund. Believe it or not, there are lots of websites that offer a range of deals for buyers, helping to save money on the cost of property fees. Take the time to do your research, and you’re sure to come across some incredible deals.

Moving cardboard boxes

Move out of your old home & into your new one

The moving costs that come with purchasing a new home can also be high. Instead of renting out a moving van and professional movers, consider moving yourself out of your old home and into your new one. The process may take longer and be more stressful, but if it reduces the cost of moving to somewhere new, surely it is worthwhile?

Buying a new home is always going to be costly. However, it doesn’t have to be overly expensive.

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