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Archive for the ‘Reverse Mortgages’ Category

You might that retirees and elderly are no longer qualified to engage in financial assistance. Well, there is no need to worry because reverse mortgages are the answers to their problems. These types of mortgages give the opportunity to the borrower to convert a portion of the loan to cash. He can either get these funds through a one-time payment or series of payments. But the owner must present his house as collateral to the lender. The loan will only be stopped in the event where the borrower dies, moves in to a new house or fails to maintain the property.

If you have plans of using the money to buy a new house, then you are free to do this. It is best that you use the one-time payment since you will really have to use huge sum of money when buying a house. The total amount to be paid through lump sum payment is equal to the amount of the down payment for the house that you wish to buy. However, it would be best if you pay off the whole amount of your dream house and just utilize the funds from the reverse mortgage to settle your monthly expenses.

So how are you going to be eligible for this loan? OF course since this is for retirees and elderly, he must be 62 years of age or more. Aside from that, he must own a house. If the owner still has a loan balance on his current house, it should be settled first before the closing procedure is done. His application will be disapproved once his loan balance is still high and will not be able to pay this before the closing. He must also be currently staying in the house.

Unfortunately, there are properties which are not eligible for reverse mortgage. Keep in mind that the house must be a single family home. If the condo unit is approved by the HUD, then he can be approved for this mortgage. Factors which greatly affect the amount of mortgage are the age of the applicant, interest rates and the appraised value of the house.

You have the prerogative on what type of payment mode you want to follow. You can have it by tenure where you will get monthly payments if one of the borrowers still stays in the house. You can also have it in terms. The payments are made at specified months. Apart from the two, you can also use the line of credit where you do not have a pre-determined time. You can get the payments with any amount you want anytime. Another option would be the modified tenure where it is a mix of line of credit and monthly payments. The last one is the modified term. This uses lien of credit mode and fixed periods.

Retirees and elderly will definitely have the best time of their lives with this type of financial aid. After all their hard for a very long time, they deserve to be rewarded with this type of mortgage.

A Reverse Mortgage could be just the ticket to enjoying a better quality of life in your retirement years.

Reverse Mortgages are helping older Americans across the country achieve greater financial security. Imagine having extra income every month for the rest of your life. Would the security of having an open Line of Credit with no repayment schedule give you peace of mind? Have you dreamed about a lifelong vacation but never seemed to have found the time or the money for it? All this and much more is possible by using some of the equity in your home as part of a well balanced retirement plan.

The thought of a reverse mortgage can fly in the face of reason at first glance. After all, most people have spent a good deal of time and effort trying to eliminate their mortgage. Is it the mortgage or the payments they’ve wanted to eliminate? For most, it’s the payments. So far so good, a reverse mortgage has no payments due during the term of the loan.
Many people consider their home as an investment. The trick has always been how to tap this investment without giving up the shelter aspect of the home. The traditional way of doing this has been to refinance to a larger mortgage or take out a home equity loan. The problem is, both of these options incur an immediate repayment schedule and in most cases extend the length of time payments need to be made. Just the opposite of what people want.

Encyclopedia Britannica defines investment as the process of exchanging income during one period of time for an asset that is expected to produce earnings in future periods. Thus, consumption in the current period is foregone in order to obtain a greater return in the future.
Is the future now? If so, a reverse mortgage allows you to get some of the equity out of your house and into your pocket without any repayment schedule for as long as you have the loan. The proceeds are tax free and can be used for any purpose you want.
What are the requirements in obtaining a Reverse Mortgage?
There are really just a few. The youngest borrower must be at least 62 and the home or condominium needs to be the primary residence to qualify for a reverse mortgage. In addition, the property must be maintained, taxes must be kept current and homeowners insurance must be in force for the loan to remain in place.

How does a reverse mortgage affect Social Security, Medicare or Pension benefits? The proceeds from a reverse mortgage do not affect any of these benefits but it’s always best to consult a financial advisor and or legal counsel. There is also no effect to SSI or Medicaid benefits as long as the monthly cash advances are fully spent every month and not accumulated. Guidelines do change so again please consult with a legal advisor and/or your local Agency on Aging.
How Much Money Can I Get?

The size of a reverse mortgage granted depends on the applicant’s age, the type of reverse mortgage sought, the home’s value, and the current interest rates. As a general rule the older the borrower and the more equity in the home, the larger the cash proceeds. Overall a reverse mortgage pays out anywhere from roughly 40% to 85% of the appraised value or FHA loan limit, whichever is smaller. The balance of the equity is retained in the house.
Currently there are three reverse mortgage products available. The government-insured Home Equity Conversion Mortgage (HECM), the Home Keeper product by Fannie Mae, and the Cash Account plan. The Cash Account product provides increased benefits for higher value properties (typically homes valued over $600,000).

The HECM product is insured by HUD and the FHA. This product represents over 90% of all reverse mortgages. HECM loan limits vary by community and are set by the FHA. The current loan limit for Hampden, Hampshire, and Franklin counties is $206,700 for a single family house. Loan limits in the Connecticut counties of Hartford and Tolland are $333,735 for a single family house.

How Can I Access the Money?

You can receive the proceeds from a reverse mortgage in any of 3 ways.
1. As a Lump Sum
2. As a Line of Credit
3. As a monthly Tenure for life or for a specific period of time.

You can also elect any combination of these. About 65% of the time people elect a Line of Credit and for good reason. The Line of Credit option for the HECM product has a growth factor. The unused portion of the Line of Credit grows at 2% more than the 1 year T Bill. This makes the current annualized growth rate almost 7%! It’s like having a tax free interest baring savings account that has a high growth rate with guaranteed security. This is an incredibly powerful feature of the Line of Credit option.

What Are The Costs?

The actual closing costs depend on the type of reverse mortgage you elect. A rough estimate for the most popular HECM reverse mortgage is about 5% of the appraised home value or the FHA loan limit, whichever is less.

Almost all costs of a reverse mortgage can be financed from the proceeds of the loan. These typically include an origination fee, closing costs, servicing fee and a mortgage insurance premium.
Why is there a mortgage insurance premium? The mortgage insurance is there to protect you. You are protected in the following way: All reverse mortgages are considered non-recourse loans. This means that no matter how high the loan balance grows, neither you nor your heirs ever owe more than the home’s market value at the time the loan needs to be repaid.
Servicing fees refer to a monthly fee charged by the lender to service your reverse mortgage. This is what’s called a “service set-aside” which is an estimate of the total monthly fees for the life of the loan. This estimated “service set-aside” is deducted from the proceeds you would qualify for and is set aside for the lender to pull the monthly fee from. There is no interest charged to you for this “set-aside” and if the reverse mortgage is refinanced, or paid off, any remaining “set-aside” funds are added back to your equity.
Closing costs are consistent with other types of mortgages and include lawyer’s fees, home appraisal, pest inspection, recording fees, etc. Origination fees are charged by the company who originates your reverse mortgage.
A free counseling session is also required by a qualified HUD office. There are several in the greater Springfield area. This counseling can be done via phone or in person.
Common Misconceptions
The lender gets your house. This is not true, the title always remains in the name of the borrower. When the loan is due, the borrower or the heirs pay back the cash advances and the accumulated interest.
All the value in your house gets used up. Although it’s true the loan balance increases with time as interest accrues, people forget that in most cases the home value also continues to increase with time. Generally speaking, this preserves the equity that remains after the reverse mortgage proceeds have been paid to the borrower.
You won’t qualify because of poor credit, lack of income, or poor health. This simply is not true, the loan is not dependent on any of these. It is true a credit report is run but only to check on potential government liens or tax liens.
You have to be mortgage free. Although the reverse mortgage needs to be in the first position you can use some of the proceeds to pay off the existing mortgage assuming it is less than the amount you’ll receive from the reverse mortgage. This eliminates your existing mortgage and your payment.
Only desperate people get reverse mortgages. At one time that may have been true. But today’s reverse mortgage borrower is more likely to get a loan out of want, rather than need. Furthermore, the ability to access tax free cash to put to work somewhere else has been a trait of savvy investors for years. In addition, a growing number of people take out reverse mortgages because they like the security of having a financial cushion or for planning future expenses. Don’t let an antiquated stigma keep you from getting the cash you want. After all, it’s your money.

Is a Reverse Mortgage Right For You?

Borrowers have many specific reasons for electing a reverse mortgage. Some are needs-driven, others can enhance the quality-of-life. AARP, in conjunction with HUD/FHA, completed a survey of homeowners who elected a reverse mortgage. Here are the results.

67% Hospital/healthcare costs

55% Repay existing mortgages

50% Reduce burden on children

50% Home repair/improvement

38% Pay property taxes

29% Daily expenses

14% Travel, something special

3% Gifts

Because it’s not a cheap loan, a reverse mortgage is not the best way to pay off a small debt. Again because of the closing costs, this is not a particularly good loan if you intend to occupy your home for less than 4 to 5 years.

Most people love their home. They’ve put a lot of themselves into it, perhaps raised a family there, have worked hard to keep it in good repair, lived, loved, laughed and cried there. The home is one of the largest financial commitments you make. And it represents one of the biggest and often overlooked sources of your financial health.

The ability to remain in your home while taking care of yourself financially is important to many of us. A reverse mortgage can give you that opportunity. If you could benefit from the extra cash to supplement your existing income, reduce credit card debt, cover medical expenses, help a loved one or just enjoy life a bit more, a reverse mortgage may be right for you.

The massive amount of recent advertisements for reverse mortgages may be tempting – but the negatives of a reverse mortgage can have far reaching consequences to consider.

The important thing to remember is even if the negatives of a reverse mortgage do not impact you directly, they can be extremely difficult for your survivors – or even for you if you choose to ever leave your home. A reverse mortgage is different from a regular mortgage or home equity loan in that there are no payments to consider – there will not be a bill hanging over your head after you receive your money. But you will be losing equity in your home, something you do need to think about.

Reverse mortgages have yet to catch on in the same way that second mortgages and other loans have, so fewer people are truly aware of what happens when you get a reverse mortgage. These mortgages only comprised .7 percent of all mortgages in the US last year – a very small portion of the mortgage world. What happens in a reverse mortgage starts out simple – a lender agrees to pay you monthly payments in cash or available money, in effect purchasing the equity of your home from you in payment installments.

In this way, the negatives of a reverse mortgage do not seem so obvious. You are getting money, not having to borrow against your home, and you cannot be kicked out of your home for non-payment of a loan. Unfortunately, there are hefty fees levied against your equity, meaning you actually will get less money via payments than your house is worth. Additionally, you will be leaving your family with a debt if you pass on – one that will require them to take action.

If a family member gets left your home or property that has a reverse mortgage, they will be required to either pay back the money you received in order to keep the home, or sell it in order to get what ever remaining equity is left in the home and pay back your mortgage. Additionally, they are forced to go through many hoops and may not be able to actually live in the home, which can be a difficulty for some families.

It is important to think about all of the ramifications of the reverse mortgage before choosing this way to get additional money. The negatives of a reverse mortgage can outweigh the positives, making this a less than ideal choice for your family.

A red hot loan package that is getting a lot of attention these days is the reverse mortgage. Common question arise regarding the loan, so let’s take a closer look.

The reverse mortgage is exactly what it sounds like. Instead of you making payments to a lender, the lender makes payments to you. While that may sound fantastic, the similarities pretty much end there. As payments are made to you, more and more of the equity in your home is converted into debt. That debt grows at an interest rate that is typically one to two points higher than a normal mortgage or refinance. This can result in the equity running out much quicker than expected.

The number one question regarding reverse mortgages has to do with equity. Specifically, what happens if the equity is all used up before the borrower dies or the home is sold? Do you lose the home, get foreclosed on or what? In the past, the ugly answer is that you would lose the home. Since senior citizens sitting on a curb did not go over well, the government stepped in. Most plans now allow you to stay in the home even if the equity is used up entirely. Some plans even call for payments to continue to be made to you. Obviously, you need to read the fine print on the loan to figure this out.

Another common question is how big will the monthly payments made by the lender be? There is no pat answer. There are a number of factors that go into the determination. These include the amount of equity in your home, the interest rate charged on the loan, the costs and the fees. Finally, the biggest factor is the particular plan you choose. You will have a choice of different options and can predict the numbers accordingly.

What happens when I die? The reverse mortgage is handled no different than any of your other assets. It becomes due. This means your heirs must either pay it off or sell the property. If they sell the property, the reverse mortgage balance is paid off. Any remaining money is then distributed to the heirs pursuant to your trust, will or other court order.

In some cases, the reverse mortgage makes sense. In others, it does not. The only way to make a determination is to discuss the details with a financial professional.

Thousands of seniors are gaining financial freedom through the government insured Reverse Mortgage program. This unique program was first signed into law by Ronald Reagan in 1988 and has seen lasting improvements over the years that make it a financial tool for senior homeowners.

To qualify a senior must be 62 years of age, own a home with enough equity to qualify and declare the property as their primary residence. They also can not be delinquent on any federal debt and participate in a counseling session given by an approved government counselor.

Reverse Mortgages apply the opposite principles of a traditional forward mortgage. Traditional mortgages gain equity in a home by making monthly payments, while a Reverse Mortgage turns equity into tax free income or usable cash. Payments on the money owed are not required as long as the home is being lived in.

Senior homeowners have gained the freedom to buy cars, do home repairs and travel. Many simply feel more secure with a larger monthly income or a line of credit to draw upon, without the burden of a home equity loan that must be repaid. Some are just tired of penny pinching and want to improve their quality of life.

Now seniors have a safe, secured means by which to achieve financial security, while retaining home ownership. The U.S. Department of Housing and Urban Development (HUD) guarantee seniors who use the Reverse Mortgage program will not pass debt onto their heirs. A Reverse Mortgage is the safest mortgage someone can get. There is no due date unless the senior passes away, sells the home or moves out permanently.

My parents really didn’t want to sell their house. They were having a tough time paying the mortgage, property taxes, and utilities plus coughing up more cash for a host of prescriptions and medical bills. Neither of them were physically capable of working and they were spending more money than they were receiving from their meager Social Security benefits. Times were hard and they were getting worse as my mom and dad dug themselves further and further into debt.

But then one day my buddy Paul handed me an article he had cut from the financial section of his morning newspaper.

He said, “I think this might be something your parents could use. It can’t hurt to look into it.”

The article was about the benefits of reverse mortgages and how they can help older homeowners maintain or improve their lifestyle in retirement. I had never even heard of a reverse mortgage and to tell you the truth when I first read the article it sounded kind of shady. I mean, how can you take a loan out and not repay the money? It just didn’t make sense.

But as I started to read more about reverse mortgages I began to understand how they work, and that they really could be a godsend to people like my mom and dad.

If you’re not familiar with them yourself, a reverse mortgage is a loan against your home that does not need to be repaid as long as you live there. It’s an ideal solution for seniors who have built up a lot of equity in their home and have no desire to move. Because there are no monthly payments to make you don’t have to worry about bad credit, bankruptcies, or low income levels.

Taking out a reverse mortgage was one of the best things my parents ever did. They no longer have to worry about keeping food on the table and gas in the car. I can see the change in their personality as if a major weight has been lifted from their shoulders.