REVERSE MORTGAGES - MEETING SENIOR'S NEEDS

Why the Reverse Mortgage Market is Booming...?

What’s so great about Reverse Mortgages? Senior homeowners want to know… and quite frankly, so do their kids. Right now, reverse mortgages are gaining popularity among senior homeowners. But why?
What’s making the reverse mortgage market boom?

First, nothing beats the proverbial “reverse mortgage market drum” louder than a challenging market. With the cost of living on the rise and the stock market seemingly as indecisive as a six-year-old at a sundae bar, maintaining a comfortable senior lifestyle is growing more and more difficult.

Secondly, the Federal Housing Administration recently announced new reverse mortgage loan limits of $417,000. That means an estimated 30% more senior homeowners could now qualify for reverse mortgages, and some who could qualify can now get a bigger pay out. Former loan limits were set by county. Many counties had lending limits around $200,000 which has significantly reduced the amount of equity that seniors living in higher-valued homes could access.

These new limits will have a positive impact on seniors’ quality of life and provide more relief to those homeowners 62+ who need help – especially in today’s turbulent economic environment.

Enter, the reverse mortgage.

Reverse mortgages were designed by the federal government specifically for homeowners 62 and older as a form of financial relief. They are designed to help you eliminate your mortgage payment and (in some cases) receive additional tax-free income that you can use however you’d like.

Think that sounds good? It gets better. Unlike traditional 'forward' home loans or home equity loans, there’s no monthly payment associated with reverse mortgages. You don’t have to pay back the loan until the homeowner no longer lives in the property as their primary residence.

So what does it take to get a reverse mortgage?

In short, age and equity. Homeowners (all names on the title) must be 62 or older, and you have to have a substantial amount of equity in your home to qualify. You’re probably wondering what exact amount of equity is considered substantial. Fair question, to which there’s no “blanket” answer. The amount of money you qualify for is specific to each applicant’s exact age and the exact amount of equity in your home, as well as the new loan limit of $417K.

There are no income or credit requirements. The best way to find out what you could qualify for is by...talking with a Reverse Mortgage Specialist.

How do reverse mortgages work?

The application process is the same as any other loan. Your current mortgage (if you have one) will be paid off with your new reverse mortgage totally eliminating any current mortgage payment you have.

From there, homeowners can choose the way they’d like to receive the income from their reverse mortgage (if money is left over) – as a monthly payment, in a lump sum or any combination of those options.

What about the kids?

Often times, the children of the homeowners inquiring about a reverse mortgage pose the biggest opposition. Why? Typically, inheritance. The parents want to leave their children in a good financial position, or maybe the children have been counting on it to help with college tuition for grandchildren… Whatever the reason, a common fear is that if the parents use the equity in their home to live on, there won’t be anything left to pass on to the kids. If inheritance in the form of equity is an issue, talk to a Reverse Mortgage Expert about your options. (Of course, you must also determine whether or not you'll need financial help from the children if you don't get a reverse mortgage, and whether the children can help out.)

If you have enough equity, you can opt against receiving the full payout, reserving a portion of the equity in your home to pass on. Or, if you have enough equity in your home to eliminate your mortgage payment and receive additional cash, you can choose to reserve that amount in an interest-bearing account to pass on, like for college tuition. You’ll definitely want to check with your financial advisor on your options.

Operator! Are the rumors true?

Remember back in grade school, you'd sit cross-legged in a circle with 15 of your classmates... The first person would send a message around the circle by whispering in the kid's ear next to him... and so on. But strangely by the time the message reached the 3rd or 4th kid, the message had changed drastically... (and usually to something rather curious). Similary, because they're not well-known as "forward" mortgages, reverse mortgages carry some mythical baggage:

You’ll owe more than your home is worth,
You need to own your home free and clear to qualify,
When you get a reverse mortgage the bank owns your home,
There are limits on how you can spend the money you receive from a reverse mortgage, and many more…

They’re myths that can quickly be dispelled by the nature of the government-insured reverse mortgage program. The government created these programs specifically to help seniors live better lives, pay medical expenses and cover the rising cost of living… not put them in a more vulnerable position.

Make sure to read up on common reverse mortgage myths, then ask your Reverse Mortgage Specialist to answer your questions in detail. Make your decision only after you feel absolutely comfortable with your understanding of the program.

That’s why every reverse mortgage applicant is required to participate in a counseling session by a third objective party to insure that you are a good candidate for the program.


Courtesy of: QuickenLoans Mortgage News, October 20, 2008