The answer depends on your individual needs and circumstances. Buying LTC insurance is part of a planning process for life and retirement. You need enough income to pay the premiums for the rest of your life regardless of premium increases or life changes, such as the death of your spouse. You need to consider how long the benefits should last in relation to the premium you will pay. Most people with modest resources may be better able to pay for a policy with 1, 2 or 4 years of coverage rather than one with benefits that last as long as they need care. Also, if you have few assets, it may not make sense for you to buy LTC insurance. Other options for paying for LTC include investments, savings, home equity credit and reverse mortgages.
Points are an upfront cash payment required by the lender as part of the charge for the loan. Points are expressed as a percentage of the loan amount. For example, "three points" means a charge equal to 3 percent of the loan balance.
Generally, when you pay points, you are paying some money upfront in exchange for lower monthly payments and/or a lower interest rate.
Most loan companies will offer a range of point and interest rate combinations. For example, if you are only paying one point, then you are likely getting a higher interest rate than if you were paying three points.
In most cases, it is a good idea to pay points if you plan to be in your home for a very long time. If you are only going to be in the home for a short period, then you should not put money toward points. Conversely, if you believe that you will remain in your house for a long time, then it may be worthwhile to pay additional points to obtain a lower interest rate. Point can be paid using cash generated from the mortgage refinance.
In some situations, the loan company will finance the points for you – offering you a negative point loan. Positive and negative points are sometimes termed "discounts" and "premiums", respectively.
The decision to pay points is unique to each consumer, and involves the tradeoff of upfront cost verses lower monthly payments.
NOTE: If your objective is to raise cash or increase your income and you have significant home equity built up, you may want to evaluate using a Reverse Mortgage instead of refinancing your home.
A reverse mortgage lets you use the value of your home to provide a source of income while allowing you to stay in the home. It may be an effective way to benefit from the money you’ve invested in your home over the years.
Yes/Sorta. There are 3 types of reverse mortgage, however, the vast majority of reverse mortgages today are part of the government-sponsored Home Equity Conversion Mortgage (HECM) program and are insured by the Federal Housing Administration (FHA). If you apply for a HECM loan, you can choose from the following options:
1. Payment of loan proceeds. You can receive loan money as a line of credit, monthly installment, a combination of these, or a lump sum.
2. Interest rate. You can choose between a fixed interest rate and an adjustable interest rate. Fixed interest rates are only available with the lump-sum payment option.
*Currently, HECMs make up most reverse mortgages offered in America. HECMs come with rules and regulations that include a requirement that the borrower receive third-party counseling.
Non-HECM Reverse Mortgages
Single-purpose reverse mortgages are also offered by some state and local governments and non-profit organizations. These are used only for the purpose specified by the lender (for example home repairs or property taxes). They may only be available in some areas for homeowners with low to moderate income. These non-HECM reverse mortgages are not federally insured.
Proprietary Reverse Mortgages
Some lenders also offer proprietary reverse mortgages, which are not federally insured. These are typically designed for borrowers with higher home values. Proprietary reverse mortgages are privately insured by the mortgage companies that offer them. They are not subject to all the same regulations as HECMs, but as a standard best practice, most companies that offer proprietary reverse mortgages emulate the same consumer protections that are found in the HECM program, including mandatory counseling.
With a second mortgage, or a home equity line of credit, borrowers must make monthly payments on the principal and interest. A reverse mortgage is different, because it pays you – there are no monthly principal and interest payments. With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.