Reverse mortgage (‘You must be aware…’)

           When you move or pass away the debt to the lender can only be repaid from the value of the property. This means that you and your heirs cannot be sued for any unpaid balance. Make sure that the loan is covered under the FHA program. Before selecting a reverse mortgage program make sure they each provide information in writing, including:
An amortization statement.
A statement showing the total annual loan cost rate. Always get your exact costs up front, in writing, including all fees, charges and costs. Beware of “shared appreciation” reverse mortgages. 

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When is a Reverse Mortgage NOT Right?

   Some married couples have one borrower old enough to take advantage of a reverse mortgage but the other spouse is too young.  In this instance, I see them wishing to quit claim the younger spouse off title to obtain the reverse mortgage.  I don’t recommend this unless the older spouse is adequately insured so that if the older spouse passes, the mortgage can be paid in full.  If not, the loan would be due and payable, and even if the younger spouse was now old enough to qualify for a reverse mortgage, chances are pretty good that he/she would not be eligible for a high enough loan amount to cover the old balance left by the reverse mortgage from the passing older spouse that has accumulated interest.  In this case, if the younger spouse did not have adequate funds from another source to pay the mortgage in full, he/she would be forced to sell the home and would be displaced.  I do not recommend a reverse mortgage to those whose health is so bad that they know there  will not be at least one borrower able to stay in the home anyway (once all borrowers on the original loan are out of the home for a period of 12 months, which includes nursing homes, the mortgage becomes due and payable).  There is no income qualification for a reverse mortgage, however, if you know that even with the relief you gain from a reverse mortgage you cannot afford the taxes, insurance and upkeep on your property, then I would suggest you look at other alternatives.  Reverse mortgages require that the borrowers still pay all the taxes, insurance and maintain the property in reasonably good condition.  If your monetary needs are temporary, then the costs of a reverse mortgage may not make it the best option.  Finally, if you don’t really even need a reverse mortgage and someone is trying to talk you into one, then talk to your trusted family members or financial advisor.   

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reverse mortgages are good sourses of…

Reverse mortgages used to be a way for homeowners to get extra cash during retirement. Now they’re also being used for a more-pressing purpose: helping people who are struggling to meet payments on high-interest-rate loans to keep their homes.

The strategy, which is relatively novel but gaining popularity among legal-aid attorneys and housing advocates around the country, calls for persuading lenders to take the cash generated by a reverse mortgage in lieu of foreclosing on older homeowners.

With a reverse mortgage, the bank makes payments to the homeowner instead of the homeowner making payments to a bank. The loan is repaid, with interest, when the borrower sells the house, moves out permanently or dies. The products are complex and have high fees – typically about 7 percent of the home’s value – and they make it difficult for homeowners to leave the property to their heirs. But they may be the best option for people who have built up equity in their home and would otherwise lose it.

Most of these older homeowners in trouble had refinanced their home into so-called subprime mortgages. Such loans – many of which feature adjustable rates that can tack sharply higher after an initial teaser period – have roiled the mortgage industry and credit markets this year as default rates have shot up, and analysts expect hundreds of thousands of additional subprime loans to go bad over the next several years.

While no one tracks subprime mortgage holders by age, the approximately 30 million Americans 65 and older who own their homes are routinely targeted by subprime lenders with refinancing deals, borrower advocates say. Given that the rescue plan recently proposed by the Bush administration and the mortgage industry doesn’t provide relief for individuals who can’t afford their current loan terms,

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Reverse mortgage lenders

There are many reverse mortgage lenders such as banks and credit unions. Rates may vary so you will want to check around with various banks before deciding. There are several types of reverse mortgage loans and they include the following:

Home Equity Conversion Mortgage – HECMs are the oldest types of reverse mortgage loans and the most popular. They are insured by the federal government through the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. The amount of money you can take out as a reverse mortgage loan depends upon your age, the appraised value of your home, current interest rates and the location of your home. The older you are and the higher the equity (what it would sell for less what you still owe), the higher the loan amount can be. For 2006, the loan limit for a home in a rural area is $200,160 while the limit for high cost areas is $362,790.

Another reverse home mortgage product that you can obtain from a lender is the Fannie Mae Home Keeper. Fannie Mae is the largest investor of home mortgages in the country and a major investor in reverse mortgages. Fannie Mae developed its own reverse mortgage product as an alternative to the HECM to address the needs of customers who had a higher property value on their home. Home Keeper loans can be larger than HECMs because their mortgage limit is higher. Another Fannie Mae reverse mortgage product is the Home Keeper for Home Purchase program. This is for seniors who wish to use the reverse mortgage loan to buy a new home. For example, let’s say someone sold his home for a $60,000 profit and wants to buy a new house for $100,000. He could get a reverse mortgage using money from a Home Keeper loan so he would not have to use his savings to purchase Reverse Mortgages

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Reverse mortgage terms

Reverse mortgages are becoming popular in America. Reverse mortgages were designed only a few years ago and were made to help people who have retired and stopped working, but still have to make monthly mortgage payments. They are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. Reverse mortgages can be relatively complex, and their use should be considered carefully by the borrower. Reverse mortgages have been around for a long time, but it wasn’t until the early 1990s that they began earning respectability after the Federal Housing Administration began insuring reverse mortgages for repayment to lenders. 

Below is a list of the most commonly-used “mortgage phrases” and their meanings to help you understand them better:

Closing – Final arrangements to transfer title of property as well as allocate charges and credits.

Closing Costs – Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges 

Equity – The difference between the current market value of a property and the principal balance of all outstanding loans.

Lender – The bank, mortgage company, or mortgage broker offering the loan. 

Mortgage – A legal document that pledges property to a creditor for the repayment of the loan, and is the term used to describe the loan itself.

Principal – The amount of debt, not counting interest, left on a loan.

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Reverse mortgage – two questions

There are two questions that homeowners considering a reverse mortgage  should ask first:1.  What index does the loan use? It could affect your cost. Financial Freedom, the reverse mortgage unit of Indy Mac Bancorp, launched a product last month that bases its interest rate on the one-month London interbank offered rate, or Libor, index. Reverse mortgages traditionally have used an index based on Treasury bonds.Using the Libor index should lower interest rates ”over the long run” for reverse mortgage users, said Michelle Minier, Financial Freedom’s chief executive. But the borrower might have to give up ”a small measure of cash, from 2 percent to 5 percent,” to get the lower rate, she added.Still, consumers should investigate products that use both indexes. Different products tack on varying amounts of extra interest to whichever index they use. One product might add 0.65 percentage point; another might add 2.00.2. What are the fees? Fees typically run up to 7 percent on government-backed loans — in which the Federal Housing Administration insures lenders’ and borrowers’ risk — but are as low as 2 percent on proprietary loans. If you’re seeking a lump-sum payout for a reverse mortgage on a high-value home, some lenders are willing to eliminate or reduce the upfront costs. And if you borrow less, you can often lower your fees, too. But you might pay higher interest rates in exchange for lower fees. 

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reverse mortgages are good sourses of…

 The media attract more viewers, readers, and listeners when they make a story exciting, scary, or dramatic. Because reverse mortgages are federally regulated loans, there really isn’t anything scary or dramatic about them when you know the facts. Be wary of interviews and articles that make reverse mortgages seem like a scam. The Department of Housing and Urban Development has done an excellent job of regulating reverse mortgages, and they are designed to help seniors, not hurt them. The National Council on Aging recently did a study that concluded that reverse mortgages are good sources of funds for long-term care planning and long-term care needs.

Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses. In general, co-ops are not allowed. Only the Financial Freedom “Cash Account” program is available on co-ops in New York City.

The loan comes due when the last remaining homeowner leaves the home permanently. This means that the loan will come due when the last homeowner passes away, sells the home, or leaves permanently (12 months or more).

If the home sells for LESS than the final loan amount, the federal government steps in and pays the lender the difference. Heirs’ assets are never at risk.

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Florida reverse mortgage

Many senior citizens of the United States have greatly benefited from the Florida reverse mortgage loan option. The mortgage amount has helped them to independently run and manage their household expenses and emergencies without having to seek the help of others. The only drawback of taking a reverse mortgage is the fact that one cannot leave his house for his heirs after him. However, in today’s day and age when everyone is determined to create their future themselves, this kind of a condition should be no problem for the house owner or his family.All our lives we spend something or the other on our homes. Be it for purchasing it in the first place, decorating and redecorating it, modifying and rebuilding structures, house painting, etc. A Florida reverse mortgage is the opportunity for the house to pay you back. The security of the house can indeed help you to lead a dignified life in a self-sufficient manner, where you create your own rules. As the rates of interest, value of the property, your age and whole lot of other factors affect the terms and conditions of your reverse mortgage; it is always advisable to seek the legal advice and guidance of a financial expert. Once you have done your market research well, then you can safely reap the benefits from a Florida reverse mortgage. 

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Reverse mortgage advances

If you receive SSI, Medicaid, or other public assistance, your Reverse Mortgage loan advances are only counted as “liquid assets” if you keep them in an account past the end of the calendar month in which you receive them. You must be careful not to let your total liquid assets become greater than these programs allow. Another tax fact to bear in mind: interest on Reverse Mortgages is not deductible on your income tax returns until the loan is paid off entirely.With a Reverse Mortgage, you will never owe more than the value of your house. In this regard, a Reverse Mortgage is part loan and part insurance product – the Reverse Mortgage lenders are pooling their risk across many customers and making a calculated bet that most will pay back the loan in full with proceeds from the future sale of their home.You’re not making any bets with your retirement income planning. You can continue living in your home and enjoying enhanced retirement income from your home, even if what you owe the Reverse Mortgage lenders has exceeded the value of your home. When you move out of your house, you will only owe the current value of the house and nothing more.When you sell your home or no longer use it for your primary residence, you or your estate must repay the lender for the cash received from the Reverse Mortgage, plus interest and service fees. Any remaining equity belongs to you or your heirs. It’s important to remember that you can never owe more than the home’s appraised value when it is sold. None of your other assets will be affected by your Reverse Mortgage loan. 

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Reverse mortgage terms

A growing number of families are taking advantage of a government-insured reverse mortgage to help their senior members prolong their independence 

A reverse mortgage can provide the funds to help senior family members remain at home and enhance their ability to direct their own care 

Can Mom and Dad Still Leave Their Home To Their Children? Yes, with proper planning, they certainly can. One way to make sure that heirs receive the value of the home is for the seniors to purchase life insurance using the proceeds from the reverse mortgage. Some seniors end up doubling or tripling the value of their estate for their heirs because they use the reverse mortgage proceeds to pay the life insurance premiums. This way they never have to touch a penny of their savings, investments, or current income to increase the value of their own estate. This also helps the heirs, because inheritance passed on through life insurance (beneficiary designation) bypasses probate, and taxes!

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