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| What You Should Know About Reverse Mortgages With people living longer, many actually outliving their money, some are turning to reverse mortgages to boost their incomes. HUD's Federa Housing Administration (FHA) The Home Equity Conversion Mortgage (HECM) is the FHA's reverse mortgage program. The HECM is safe and it is a good option for older Americans looking to supplement their company pensions and social security. What is a reverse mortgage? A reverse mortgage is a home loan that lets you convert part of the equity in the house into cash. Who qualifies for a reverse mortgage? You must be a homeowner 62 years old or older. You must own the house outright or have a very small balance owing on the existing mortgage. This small balance will be paid out from the proceeds of the reverse mortgage. Consumer is protected Before a reverse mortgage application is processed, the transactionl is reviewed by an independent counselor. HUD has a network of counselors available to meet with homeowners. No shared appreciation The lender can not share in the increased market value of house. In earlier years, if the homeowner wanted more money, he or she had to agree to give the lender a portion of the house appreciation. How much money can you get? The amount of money you can borrow depends on your age, the appraised value of the house, and the current interest rate. Generally, the older you are and the more valuable your house, the more money you will get. How do you get payments? You can choose a variety of payment options. A lump sum payment. Equal monthly payments for as long as you live in the house and the house is your primary residence. Equal monthly payments for a set period of months. Line of credit Combination of a line of credit and monthly payments for as long as you live in the house. Combination of a line of credit and monthly payments for a set period of time. No maturity date The reverse mortgage stays in effect as long as you live in the house, you own the house, and the house is your primary residence. Will you have money to leave for the kids? How much money you will have to leave for your estate depends on many factors. The value of the house on your passing is important. So is the amount that has to be repaid to the lender. A simple scenario, would be, the house is sold, the lender is paid and the balance goes to the estate. |
| When House Values Drop Should You Get A Reverse Mortgage? Over the last 3 years the mortgage meltdown and the housing crisis have eroded much of the equity in houses. The question facing many of America's seniors is whether they can still get a reverse mortgage. You can still get a reverse mortgage. However, remember that the amount of money you get will depend on the appraisal report, your age and the interest rate. The current lending limit is $625,500 through December 31,2010 for FHA HECM and Fannie Mae HomeKeeper. This amount is set annually. The analysis you have to do when making a decision about a reverse mortgage is comparing the benefits of selling your house to the benefits of a reverse mortgage. How much would you get for the house? Would renting be better? How much for rent? How much would it take to buy another house? And how much would be left over? |
| Key Benefits Of Reverse Mortgage Freedom and Flexibility You can live in a nursing home up to 1 year before the reverse mortgage is due. Tax-Free Money Interest on a reverse mortgage is tax-deductible at the time of full loan repayment. No taxes are paid on the money from a reverse mortgage. Stay in your home You can stay in your home and have access to the home's equity. Remain independent You can tap into money that built up over the years in your house. You will not have to depend on children and other relative for financial assistance. |
| Process Of Getting A Reverse Mortgage Initial Discussion Talk with a few companies. Have a list of questions prepared. Then decide which one you want to deal with. Counseling There are HUD counselors available to answer questions and make suggestions. Appraisal An appraisal will be conducted in order to determine how much the house is worth. Inspection An inspection is required that the house is structurally sound, that the roof is good and that the house will meet the FHA requirements. Underwriting Similar to a regular mortgage, underwriting will be done. Closing The closing is done at a settlement office or at the lawyer's office. It is better if you select your lawyer and not the lender's lawyer. Readers that read this also liked: When To Get A Second Mortgage Mortgage Rates Still Low: Get 'Em Refinancing With An ARM No Cost refinance: Be Cautious |
What To Do If You Marry Someone With A Reverse Mortgage Sometimes people 62 and over enter into new romantic situations and get married. If your new spouse already has a reverse mortgage, you should try and negotiate with the lender and get your name added to the mortgage. This protects you in the event that you outlive your spouse. Expect some costs because this type of transaction will be considered a refinance if the lender agrees to the new transaction. If the lender refuses to refinance the mortgage, you should shop around. The situation is that important because you will be left nothing for all your years of companionship and support to the household. When you decide to stay off the mortgage and your spouse dies, you are left with a couple choices. Number one, pay off what is owed and keep the house. In this scenario, you get to keep any money that is left, over and above what is owed the bank. And number two, move out and let the bank take the house. One of the good features about reverse mortgages is that they are non-recourse loan. That means that if there is no equity left in the property at the time of the borrower's death and it is worth less than what is owed, you can simply walk away and have no liability to the lender. Cindy Meyers, a reverse mortgage specialist with Wells Fargo in Winter Park, Fla., said that if a refinance is not in the cards, you should contact an estate planner or elder-law attorney for advice on how best to protect your interest. "In many cases," Meyers said, these professionals "are able to utilize insurance products that would have a death benefit in order to cover the outstanding reverse mortgage balance. You are then able to pay off the original reverse loan and retain the home. Then, if she is 62 or older, she could consider obtaining a new reverse mortgage in her name and access the equity that's left in the property." |
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