Reverse Mortgages Pros And Cons » Reverse Mortgage

Debunking The Reverse Mortgage Myths

admin — Mon, 30 Nov 2009 06:55:23 +0000

Carlos Scarpero asked:

A reverse mortgage is a government sponsored product for seniors 62 and over to stay in their homes and improve cash flow. Reverse mortgages have gained significantly in popularity in recent years. While they are becoming more widely accepted, there are still many myths and misunderstandings surrounding reverse mortgages, This article will explore some of those myths.

Myth 1: Reverse mortgages are only for desperate seniors

This first myth might have been true in the old days of reverse mortgages but not today. You can use reverse mortgages for a variety of reasons from estate planning, vacations, paying for college and paying down debt. In most cases obtaining a reverse mortgages can be a very wise decision. You can even use a reverse mortgage to purchase real estate.

Myth 2: The bank takes your house

This is simply on the case. The bank does not take your house in a reverse mortgage. Banks don’t want your house. When you decide to sell your house, you simply pay off the reverse mortgage out of the proceeds of the loan.

Myth 3: Reverse mortgages are predatory

Reverse mortgages are one of the most regulated of all mortgage loans. You are required to obtain counseling before applying for a reverse mortgage and there is a 3 day right to cancel like with a standard refinance.

Myth 4: Reverse mortgages are too expensive

While some financial products like home equity lines of credit do have lower closing costs, reverse mortgages can save you money especially if the alternative is moving. Most of the added costs of reverse mortgages are for the FHA insurance, which protects your home investment. Also, the added benefit of not having to make monthly payments far outweighs the costs.

Myth 5: I can end up owing more than my house is worth.

This is simply not the case. If the property declines in value and the reverse mortgage balance is higher than the property value, FHA insurance will kick in and cover the difference. You are protected, which is very nice in a declining market.

Myth 6: Reverse mortgages cause tax penalties and can influence Social Security benefits

This is another very common misconception. Reverse mortgage proceeds are tax free as they are simply a loan. Because of this, they do not factor in to Social Security benefits.

As you can see, reverse mortgages are a great way for you to keep your house and earn some extra income in your golden years. As with any financial decision, good advice is essential. You should seek competent help for a mortgage broker or lender who specializes in the field of reverse mortgages.

Reverse Mortgage Explained

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The Reverse Mortgage is Meeting the Needs of Seniors in a Big Way

admin — Sat, 21 Nov 2009 10:55:37 +0000

Tim Robbins asked:

In most cases the senior is looking places to find money to off set the major loses they have felt from the banking and investment crisis. The one place that is still a safe haven in many areas is the home, even with declining values. The main reason is that most seniors purchased their homes when values were mush lower before the great appreciation era. If a seniors still has a mortgage on their home and many do have a current mortgage on their home and have to make payments every month. If a senior has a first mortgage lets say just for $100,000 at a 6% rate they are putting out over $600.00 per month or $7,200 per year. This amount if they did not have to make the payment would be added to their income that they would be able to use to live.

In many cases seniors over the years when the economy was booming many took at 30 year loans and or adjustable rate mortgage and are now faced with higher payments and they are trying to stay afloat.

If a senior is faced with this problem they should really consider a Reverse Mortgage for many reasons not to mention relief from payments. In many cases not only would they be free from mortgage payments, but they would receive additional funds to use as they see fit. Under the Reverse Mortgage program they senior controls how and what they spend the money on once they have closed.

Some things never change when doing a Reverse Mortgage and that is they still must pay the taxes and insurance on their home. If a senior is use to having an escrow of taxes and insurance they maybe able to set aside the monies with the company and have them pay it yearly for them.

One thing that all seniors should be looking at is the availability to access the money that they need from their home that they paid for over the course of their lives. In the years that you will need it the most and not have to worry about paying it back in their lifetime.

Many seniors are now thinking that if they take out a Reverse Mortgage and the bank or Mortgage Company goes out of business they will be out of luck. This is not true it is protected by the FHA mortgage insurance, that if they do go out of business then Federal Government takes over and pays them the money. The Reverse Mortgage is the safest mortgage in the entire mortgage industry. Unlike a typical mortgage where a lender has many options to force your paying of the loan, the Reverse Mortgage has the full protection of the US Government that guarantees that the senior will never have to leave their home for as long as they live. This of course is providing they pay their taxes and Insurance and continue to live in the home as their primary residence.

Now in 2009 a new program is emerging within the Reverse Mortgage and this a great option for many seniors who have one reason or another sold their home or have to move to a newer location. The Reverse Mortgage purchase program is now available to seniors over the age of 62. The program is design to allow seniors to purchase a home without any mortgage payments for life. Now just to make it very clear this does not mean that a senior can purchase with no money down. This is not the same mortgage that got this country in to the financial situation that we are in where people would by a home with zero down or less in some cases.

A senior who is looking to purchase a home will have to have money to purchase a home; it is all based on the age of the person and the appraised value of the home. Let’s say that a person age 62 wants to purchase a home that is appraised at $200,000, they would need approximately 40% down payment on the home. They would in most cases be able to finance all or part of the closing cost within the Reverse Mortgage. But let’s look at it in another way! Remember the older you are the less you will need down!

If that same person wanted to purchase a home using a conventional mortgage, they would need at least 20% down and would have to qualify with at least a 720 credit score and have the income to qualify for the mortgage payment.

So let’s look at the difference!

Conventional Reverse Mortgage

$200,000 Purchase price ………………………$200,000

$40,000 down payment ……………………….$80,000

$160,000 mortgage …………………………….$120,000

$858.00 per month payment……………………Zero per month

Now this is what it looks like on paper for a conventional mortgage verses the Reverse Mortgage the big difference is that a senior for a Reverse Mortgage purchase they will not have to qualify for the loan they already are if they are 62 or older. Also under the conventional mortgage if a senior fails to make a payment on their mortgage they will be foreclosed on just like anyone else.

For the senior who has a mortgage currently and is worried if they are going to be able to make payments on the mortgage Think Reverse Mortgage! No Income or Credit qualifying; if think this isn’t a big deal call your mortgage banker and see what it takes to get a mortgage today.

Also this is very important issue your conventional mortgage is not guaranteed that you will stay in your home for the rest of your life!

Here is what you have to do to get a Reverse Mortgage for your home!

Speak to a Reverse Mortgage Specialist who can educate you on all aspects of the program.

You will be required to have a FHA Approved counseling session and receive your certificate to hand to the mortgage company.

A Fully executed loan application must be signed and submitted.

The FHA appraisal must be completed for value and condition of property.

The title search must be completed and cleared of any and all liens and judgments

All insurances must be changed all endorsements

Closing is scheduled once all final conditions have been cleared.

Closing takes place either in the home or at a title office.

The client must wait three business days for the cancelation period which includes Saturdays.

Money is disbursed and all existing liens are paid off and any additional funds available are sent to the person who closed on the loan.

So if you are thinking of how you are going to make it through these hard times, waiting to see if the market will ever turn around you are loosing money in your home.

Remember this as the stock market, and real estate even stay where it is now you may never see the return of that money.

Reverse Mortgage Wholesale

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The Reverse Mortgage is Meeting the Needs of Seniors in a Big Way is from Reverse Mortgages Pros And Cons

Fannie Mae’s Reverse Mortgage

admin — Wed, 18 Nov 2009 23:35:52 +0000

trinity reverse asked:

Many senior citizens may find themselves in a tough decision when considering moving from their current location. When a man, woman, or couple are enjoying their golden years, the last thing they want to do is worry about a monthly mortgage payment. Yet, many retired citizens, even if they are relatively well to-do, are not able to hand out immediate cash to cover the cost of a new house. The fact that mortgage payments are all but obligation for people looking to purchase a new home is very stressful for senior citizens who simply want to be near family, grandchildren, or a dream location, and relax by enjoying carefree days. Yet, mortgages are a fact of life, right? Well, technically yes, but there is a better option available strictly for society’s beloved senior citizens, our grandmas and grandpas, our elders and wise men/women: Fannie’s Mae’s Reverse Mortgage product.

Fannie Mae is the nation’s largest home mortgage investor. However, Fannie Mae also invests heavily in reverse mortgages. Reverse mortgages are payment plans that work oppositely from regular mortgages. For example, instead of the homeowner having to make monthly payments to a lender, the lender is the one who makes the payments directly to the homeowner. Reverse mortgages are available in every U.S state, but only for citizens 62 years or older. And, although there is a federally insured system for reverse mortgages called the Home Equity Conversion Mortgage (HECM), Fannie Mae has managed to improve the plan by implanting the nationally available "Home Keeper Reverse Mortgage"

Home Keeper is similar to standard reverse mortgage plans in most aspects, but it differs in the fact that Fannie Mae’s plan has more benefits. For example, "Home Keeper Reverse Mortgages" include all of the regular aspects of a reverse mortgage such as the following: homeowners are paid either in lump sum, monthly payments (as long as the borrower occupies the home as his/her principal residence), line of credit, or a combination thereof. If the homeowner becomes deceased, has to move out into another’s care, or decides to sell, then the lender is paid back the reverse mortgage loans by selling the property, and keeping the money. If the property is sold for more than the due loan amount, then the difference is given to the homeowner, or heir(s), if the property sells for less money than the due loan then insurance usually covers the difference.

The added benefits with Fannie Mae’s "Home Keeper" reverse mortgage plan is the ability for people to purchase a new home in one single transaction, but without the out-of-pocket cash. This gets rid of any new monthly mortgage payments that must be paid in part by the reverse mortgage loans, and aids in senior citizens keeping more of the sales proceeds from their old house, or even a heftier amount of savings that can be used for other purposes.

So, if a senior citizen sells his or her home, and makes a profit, then that person can use the profit made by his or her sell to partly fund a new housing purchase. However, instead of having to either pay for the remaining costs of the new house with out-of-pocket money, and in order to avoid taking out a mortgage, then the senior citizen can actually pay for the rest of his or her new house up-front with the Home Keeper reverse mortgage. Fannie Mae’s Reverse Mortgage product affords senior citizens amazing benefits by providing all of the conveniences of a reverse mortgage and more. Now you can relax and enjoy life to the fullest without having to worry about those pesky mortgage payments, or how you are going to pay up-front for a new house out of a savings account. After all, you need to have plenty left for spoiling the grandkids when they come to visit your beautiful new house.

For more information please visit our website on Reverse Mortgage

Information On Reverse Mortgage

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Reverse Mortgage Wholesale Loans: Where Your Money Comes From

admin — Mon, 09 Nov 2009 09:18:30 +0000

Wade Robins asked:

A reverse mortgage wholesale product is not directly available to you as an applicant for a reverse mortgage. It is sold to a lender at a discounted (wholesale) interest rate, and the lender then offers it to you after adding points to the rate.

Sources Of Reverse Mortgage Wholesale Loans

There are only three organizations who sell reverse mortgage wholesale products; Fannie Mae; the Federal Housing Authority (FHA); and the Financial Freedom Cash Account. The loans from each of these entities vary in their available payment alternatives.

The FHA reverse mortgage wholesale product is called the Home Equity Conversion Mortgage, or HECM. The maximum you may borrow against your home in this program is about $360,000, but your limit will depend on your home’s location. The HECM is the reverse mortgage wholesale product underlying over 90% of all US reverse mortgages.

Both the FHA and HUD–the Department of Housing and Urban Development–guarantee FHA reverse mortgage wholesale loans. The guarantee means that the borrower is assured of getting the amount promised, and that the lender is assured of getting the entire principal and accrued interest when the loan is terminated, even if the home is sold for less than that amount.

Fannie Mae guarantees its Homekeeper reverse mortgage wholesale loans, which will allow you to take up to $417,00, and is somewhat unusual in that Fannie Mae allows you to use the proceeds from your existing home to purchase a less expensive one. Although Fannie Mae is not run by the Federal Government, the amount of business they do, and the strict regulations to which they must adhere make their guarantee of their reverse mortgage wholesale loans as solid as those of the FHA and HUD.

Both FHA and Homekeeper reverse mortgage wholesale loans are available in all fifty states.

Financial Freedom Cash Account reverse mortgage wholesale products from a subsidiary of Shearson Lehman are designed for homeowners wanting to borrow against high-value homes, usually with a minimum appraised value of $500,000. There is no limit to the amount which can be borrowed with a Financial Freedom Cash Account loan, and the loans are privately guaranteed. They are, however, only available in twenty-four states.

Where To Find A Reverse Mortgage Lender

Because you, as an applicant for a reverse mortgage, are not eligible to get a reverse mortgage wholesale loan, you should comparison shop among reverse mortgage lenders to find the ones who offer the lowest markups on their products. You can find a list of reliable lenders in your state by doing a search at the National Reverse Mortgage Lenders Association–NMRLA–website.

Once you start looking for a reverse mortgage wholesale through LLS Financial or any other company, you will quickly start to see a trend. You want to check on how quickly each of these reverse mortgage companies will be able to approve you. Typically a loan takes a couple of weeks to process – but when it comes to a reverse mortgage wholesale you should be able to have your reverse mortgage in hand within twenty four hours

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Information on Reverse Mortgage

admin — Thu, 08 Oct 2009 21:07:23 +0000

trinity reverse asked:

Almost everyone, young and old, knows about mortgages. Mortgages are a premier way for homeowners to pay for new houses, and insure safety and increased equity later on in life in case homeowners wish to sell their houses. Yet, most people don’t know about reverse mortgages, not even the people that should. Reverse mortgages are only for U.S seniors who are 62 years or older, and is a very good way for elderly people to be able to move into a new house without having to pay for monthly mortgage rates, and in fact receive money instead of spend money. However, even though reverse mortgages are incredibly beneficial to many senior citizens, there isn’t a lot of information on reverse mortgages readily available, and usually the only way to find out about these amazing plans is to already know about it, which many people don’t.

Even when willingly seeking out information on reverse mortgages, the information that is found can be confusing. However, there are many ways to gain clarity on exactly what a reverse mortgage is, if you qualify for a reverse mortgage, what kind of reverse mortgage plans are available, as well as all of the other essential information reverse mortgage applicants need to know before deciding to take the plunge.

To begin with, a Reverse Mortgage is a plan where the lender pays money to the borrower instead of the other way around (as is common with a regular mortgage plan). The lender will pay money to the borrower either in a lump sum, monthly (as long as the borrower remains in the home, and has not passed away), periodic credit lines, or a combination of these types of payments, and this all depends on the reverse mortgage plan. As the lender pays the borrower, debt on the property increases; however, if the borrower decides to sell the house, the borrower needs to move out of the house (either in the care of a family member or retirement home), or the borrower passes away, the debts will be covered by either selling the property, or by the heirs to that property taking over. If the property is sold, and the money gained is more than the debts owed, then the difference is either given to the living borrower or the borrower’s property heirs. If the money from the property is not enough to cover the debts accumulated by the reverse mortgage plan, then the borrower’s insurance will usually pay the difference upon the borrower’s death, or incapacity to live on the property any longer.

The money gained from the lender can be spent and stored virtually any way the borrower pleases. However, if an existing mortgage on the household needs to continue being paid off, then the borrower must pay for that with the reverse mortgage money. Also, if a person buys a house on a very good piece of property that increases in value, and in turn increases in equity, then that person may even be able to take out one or two more reverse mortgages in addition to the one the person already has.

Even with the information above, the specifics of a Reverse Mortgage, such as how much money can be borrowed, what kind of payment plans are available, and if you qualify, are still too numerous to count. However, Fannie Mae, Wells Fargo, and other companies who offer this type of mortgage are required by law to provide reverse mortgage applicants financial counseling services for absolutely free, this allows people who are unsure, or just want to learn more, the ability to gain more information on reverse mortgages.

So, in order to find out if a reverse mortgage is good for you, as well as what kind of plans are available, and how to calculate your eligibility for reverse mortgage loans, it’s important to utilize the free financial counseling service applicants receive. And, as always, carefully read what each reverse mortgage plan says with a friend, spouse, or trusted accountant, and always make sure to compare services. This will guarantee senior citizens get the most information on reverse mortgages, and pick t he best personal plan.

For more information please visit our website on Reverse Mortgage.

Reverse Mortgage Wholesale

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Annuity Reverse Mortgage Assists People in Leading Secured Life

admin — Sat, 03 Oct 2009 07:52:22 +0000

Antonio Redford asked:

There are reverse mortgages and there is one annuity reverse mortgage. Often people get confused with both of them. Well, for your information, this kind of reverse mortgage lets the senior citizens or the borrowers to procure good money against the equity in homes. So do not wait and apply for this loan as soon as possible for a secured life.

Annuity reverse mortgage is unlike its counterpart and is gaining popularity amongst investors. Moreover, it provides maximum results that the borrower is seeking and expecting. The advantage attached to this type of reverse mortgage is that the balance of loan decreases with the time. This happens due to borrower’s ability to pay back the loan on right time. In fact, the borrower gets money for the equity against his house. However, one should not mingle an annuity reverse mortgage with a home equity loan. In fact, this loan is also different from equity line of credit. Well, if the borrower follows either of these two, then he or she can pay the monthly interest or the amount that has been drawn from equity line by him or her. In regular reverse mortgages the borrowers do not have to pay anything until the loan is paid off. In fact, there are many kinds of annuity reverse mortgages in the offing by the federal and regulatory authorities in the United States.

Well, these mortgages are less expensive in comparison to conventional type of mortgages. However, an annuity reverse mortgage is perfect choice for person expecting more benefits through this policy. One can receive an amount in a form of lump sum or equated monthly installments. Thus, do not wait any more and make your life comfortable with an annuity reverse mortgage. These annuity reverse mortgages are commonly referred as single purpose reverse mortgages. However, there are some restrictions attached to an annuity reverse mortgage like how the money will be distributed or used by the customer. Federally insured home equity is another annuity mortgage that offers conversion services for the equity of the borrower’s house. It is a bit higher in the interest rate in comparison to other private sector reverse mortgages. The last or the third type is offered by private sector or proprietary reverse annuity mortgage service providers. However, all these annuity mortgages carry charge origination fees along with closing costs also.

If the person looking for this reverse mortgage is still undecided or is confused then he or she must seek assistance from a professional who can help the persons in getting better and secured deals. In fact, people should approach reverse mortgage and get information on the policy and the intricacies involved in an annuity reverse mortgage. This way, they will be able to understand the complexities of this reverse mortgage, so that no on tries to misguide them in future. In fact, just like any other reverse mortgage, an annuity mortgage demands the loan to be paid when the owner dies, or the homeowner sells the home or relocated himself out of the country. However, there are conditions like bankruptcy, fraud and misrepresentation by the applicant can make him ineligible for the loan.

Reverse Mortgage Explained

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Annuity Reverse Mortgage Assists People in Leading Secured Life is from Reverse Mortgages Pros And Cons

What are Reverse Mortgage Loans?

admin — Tue, 15 Sep 2009 07:49:21 +0000

Arek Zbikowski asked:

Do you know that there are mortgages that you do not need to repay either as you continue living at your present location or, indeed, throughout your entire lifetime? Yes, there are. These types of home loans are known as reverse mortgages.

In a reverse mortgage, you borrow money from the equity of your home, but you pay nothing as long as the property remains under your possession. With reverse mortgages, you are able to secure money for making other investments. A reverse mortgage allows you to turn the value of your home to money that you may use for other purposes. And there are no monthly payments to be met.

There are different ways through which you may receive money from a reverse mortgage. For example, you may either get the whole amount of your reverse loan at a go, or you may receive stipulated monthly payments. You may also receive the money in the form of creditline account. In such a case, you only receive the required amount of money at times when you need it. Reverse mortgages are so flexible that you may instead opt for a combination of the various methods mentioned.

Whichever method you use to get money from a reverse mortgage, the common denominator is the fact that you will not be required to make any payment before you permanently move from the home or sell it. If you do none of these, you won’t make any payment until your death! Those who normally qualify for reverse mortgages are people who have reached the age of 62 and above.

When you take the conventional mortgages, you will need to go through strict pre-qualification processes. For example, your assets and income will be closely reviewed in order to verify whether you are in a position to pay back the loan. With reverse mortgages, this does not apply given that there are no monthly payments to be made. It is relatively simple to qualify for a reverse mortgage. You do not have to reach a given level of income since you will not be making any monthly payments. There is no risk of losing your home with reverse mortgages.

As much as it has many advantages, a reverse mortgage has its disadvantages too. You make no monthly payments but instead turn the value of your home to cash. This is not necessarily good as far as your home equity is concerned. As the name implies, things work out the opposite way with reverse mortgage. While the passage of time helps you to get out of your debt with other mortgages as you make monthly payments, with reverse mortgages, your debt actually rises with time. This in turn means that the equity of your home becomes less and less.

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Reverse Mortgages Prevent Foreclosers

admin — Thu, 29 Jan 2009 09:25:00 +0000

Foreclosure Prevention with a Reverse Mortgage

Will a reverse mortgage be able to help anyone facing the possibilities of foreclosure? Many California homeowners who are close to foreclosure are turning to reverse mortgages for help. Can they help you?

California homeowners who are close to foreclosure are increasingly turning to reverse mortgages for help. They have owned their home for the last two to five years while the real estate market was great and the value of their home was rising rapidly.

They often got a large mortgage, feeling confident they could afford it for some time and planned to later refinance or sell the property and see a profit through appreciation. But many of them took cash out of their home’s value when they refinanced.

In every instance they are now finding it tough to pay their mortgage, whether because of a loss of employment, loss of income due to retirement, or just poor planning.

Will a reverse mortgage be able to assist people with this problem? It is hard to say; it really depends on the particular case. It may be a good idea if they have a lot of equity and are older than 62 years of age. A reverse mortgage will pay off all current mortgages if they qualify and they’ll never have to make another monthly mortgage payment again. And then foreclosure risk is gone! The most important issue is determining if the homeowner can actually qualify for a reverse mortgage.

In many cases, the homeowner has taken out a $500,000 loan (or combination of loans) against a house worth $600,000. And in those cases, the answer is unfortunately, no. Reverse mortgages require a lot of home equity in order to qualify. The reason is that the lender cannot ask the homeowner for a mortgage payment for as long as the homeowner lives there.

Since lenders have to get interest on their loan, they just add the interest to the principal balance of the mortgage. Most lenders do not like to own homes, so they don’t lend a high percentage of the home’s value upfront. In this way, even though the loan balance will grow significantly over time, they maintain a reasonable loan amount compared to the value of the home (also known as Loan to Value or LTV).

Beware of Reverse Mortgage Scams
As the concept of reverse mortgage is becoming increasingly popular among seniors, who are looking at it as a way to supplement their income…

In what situations can a reverse mortgage assist the homeowner dealing with foreclosure? In brief, a person can qualify for a reverse mortgage once they have built up a great deal of equity in their home. Fortunately, reverse mortgage do not require good credit, any income or assets other than home equity. But the homeowner will need more equity in their home if they are relatively young.

If they are more advanced in age then less equity is required. Other factors include the home’s location and age, and to a smaller degree current interest rates. Depending on these variables, the amount of money available from a reverse mortgage is usually between 30 and 60 percent of the value of the house.

The reverse mortgage is an ideal solution for preventing a foreclosure if the homeowner qualifies for enough cash to satisfy the amount of all their existing mortgages. But it must satisfy all balances owed on the property – no second mortgage can survive or be granted after the reverse mortgage is in place.

All debts against the property, such as liens and any delinquent property taxes, need to be paid off with the reverse mortgage proceeds. This will not work if the sum total of all debts is above the maximum loan amount that the homeowner qualifies for.

A homeowner who is facing foreclosure can be helped immensely by a reverse mortgage. With that said, younger homeowners (under 62) and those without adequate equity will not qualify for a reverse mortgage and will have to find other means to stop a foreclosure.

Reverse-Mortgage-Info.net is a division of FutureSafe Financial, specializing in California reverse mortgages and providing qualified reverse mortgages for seniors 62 years and older. Please contact Reverse-Mortgage-Info.net for more information and a free reverse mortgage quote.

By Luke Helm
Published: 4/5/2008

IRS Misinformation on Reverse Mortgages
For most borrowers, the date that any interest is paid on a reverse mortgage is the day it is paid off in full.

83 Year Old Woman Swindled Off Her Reverse Mortgage Earnings by …
On a lighter but important note, a man Lewis J. Bekis was charged to court for swindling his own 83 year old mother off her reverse mortgage and other earnings.

Reverse Mortgages – In Retrospect
Credit products are a multi-billion dollar industry in the US alone. Much of the country’s economic indicators rely on this once-stable industry.

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Reverse Mortgage Loan Features And Cautions

admin — Thu, 06 Nov 2008 00:00:00 +0000

Reverse mortgages have some very attractive features, especially if you are trying to get the most out of limited retirement income. Since this type of mortgage is a loan advance they are not taxable and normally will not effect your Medicare or Social Security benefits. The homeowner retains title to the home and will not have to make monthly payments. This really helps stretch your retirement cash.

When the homeowner sells the home, it is no longer the primary residence or when the last surviving borrower dies, the loan must be repaid. With a HECM program, the borrower can live in a medical facility or nursing home for up to 12 months before requiring that the loan be repaid. This provides a margin of comfort and safety for surviving children or other care givers.

As with any mortgage program directed to seniors, there are things to be aware of.

Since interest is charged each month and added to the outstanding loan balance, the amount you owe on a reverse mortgage will grow over time.

Most reverse mortgages have variable rates that are tied to a financial index and change on a monthly or annual basis. Fixed rate reverse mortgages are available but do not provide as much cash access as the variable rate loans.

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A reverse mortgage uses up all or a significant portion of your home equity. This will result in less for your heirs or your possible future needs. Most reverse mortgages contain a “nonrecourse” clause which states that you or your heirs will not be responsible for paying back more than the value of the home when the loan is repaid.

You retain title to your home and will continue to be responsible for property taxes and the normal upkeep expenses related to your home such as insurance, utilities, and maintenance. Your loan may become due and payable if you default on your property taxes. Some taxing districts provide for a senior waiver to defer property taxes until your home is sold. Check with you area taxing authority to see if this is available in your area.

Since you are not paying the interest on a reverse mortgage but simply letting it accrue, it is not deductible on your income tax return. When the loan is paid off or your home is sold it will be deductible.

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Before taking out a reverse mortgage to help with your retirement income, you should consult with your children and/or an advisor other than the mortgage company to make certain this is the right thing for you to do.

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Reverse Mortgage Types And Benefits

admin — Fri, 31 Oct 2008 04:29:21 +0000

Reverse mortgages are not of a one size fits all type. You need to look at all the available types to be sure you get the best reverse mortgage for you own situation at the least possible cost.

Single-purpose reverse mortgages are, as the name implies, designed for a particular purpose as specified by the nonprofit or government lender. This might be for property taxes, home improvements or repairs. In order to qualify for these loans you generally have to have low or moderate income and they are not available everywhere. But if you can qualify for one, you will enjoy the lowest possible loan costs.

HECMs and proprietary reverse mortgages have no income requirements and can be use for any purpose but are usually the most expensive. This may not be a problem if you intend your current home to be your final residence but if you plan on moving within a short time, this probably is not the way to go.

You are required to meet with a government approved hosing counselor before applying for a HECM. The counselor will explain all of the financial implications of the loan and point out alternatives to you. The counselors charge a fee for this service which is dependent upon your income, but will not be more than $125.00 (currently).

Several factors determine the amount of the money you can borrow through a HECM or proprietary reverse mortgage. These include including your age, the type of reverse mortgage you apply for, the FHA appraised value of your home, current interest rates and where you live. As a general rule, the more your home is worth, the less you currently owe on it and the older you are, the more money you can get through a reverse mortgage. The AARP has a free reverse mortgage loan calculator that is easy to use.

The HECM gives you options as to how you receive funds from a reverse mortgage. Options include a fixed monthly cash advance for a certain period or for as long as you stay in your home. You can also opt for a line of credit and then draw on this credit line as you choose. You may also select a combination of these methods.

HECMs will usually provide for a larger loan advance at a lower total cost when compared with proprietary loans. But higher-valued homes may provide the owner with a larger loan advances with a proprietary reverse mortgage.

There is only one way to find out which of the available reverse mortgage loan program is right for you. Shop and compare. And don’t be afraid to deal with a company you find online. We did and saved hundreds of dollars in costs.

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Reverse Mortgage Types And Benefits is from Reverse Mortgages Pros And Cons