I had a story here about "brains" and "reverse mortgages", but the story was removed as the other page administrator (not the article writer) was not happy I included it in this compendium. And, I provided credit about the writer and credit to the site through links back to the administrator's site. Unfortunately there are some who don't like to share information, or understand that the more their items are posted (with link-backs), the more readers they will have for their site.
Showing posts with label Reverse Mortgage. Show all posts
Showing posts with label Reverse Mortgage. Show all posts
1/11/2010
7/23/2009
SENIORS FEAR NET WORTH NOT ENOUGH
Over Half of Seniors Fear Current Net Worth Can’t Sustain Their Retirement
July 22nd, 2009 by admin Published in News, Reverse Mortgage.
Its no secret that the current economic crisis is having a lasting impact on many older Americans, forcing them to make difficult financial decisions due to having such little time and resources available to recover from losses in their retirement portfolio.
A new survey conducted with United Sample, in partnership with Golden Gateway Financial that polled a nationwide sample of more than 500 senior citizens aged 62 or older and found half of the respondents net worth has decreased by 10 to 30 percent. This is forcing many older Americans to put off retirement until after age 70.
"Even though some economists are beginning to grow optimistic, older Americans continue to feel real pain and must make hard tradeoffs and decisions," said Eric Bachman, founder and CEO of Golden Gateway Financial. "This is the worst possible time for the 40 percent of seniors now considering delaying retirement to be searching for jobs. It’s unfortunate that the hopes and dreams of these retirees are being put on hold."
Before the economic crisis, 67 percent of respondents planned to retire before age 70
Now, the number of seniors planning to retire by age 70 dropped to 40 percent
Before the economic crisis, 30 percent of those surveyed planned to retire after age 70
Now, almost 50 percent of seniors plan to retire after age 70. More than 40 percent of seniors polled said the current economy has had some kind of negative affect on their ability to retire. More than 50 percent of respondents said they are concerned that their overall net worth may no longer be enough to sustain their retirement. 86 percent of seniors said they had a reasonable understanding of their net worth, and 50 percent said that net worth had declined by between 10 and 30 percent .
July 22nd, 2009 by admin Published in News, Reverse Mortgage.
Its no secret that the current economic crisis is having a lasting impact on many older Americans, forcing them to make difficult financial decisions due to having such little time and resources available to recover from losses in their retirement portfolio.
A new survey conducted with United Sample, in partnership with Golden Gateway Financial that polled a nationwide sample of more than 500 senior citizens aged 62 or older and found half of the respondents net worth has decreased by 10 to 30 percent. This is forcing many older Americans to put off retirement until after age 70.
"Even though some economists are beginning to grow optimistic, older Americans continue to feel real pain and must make hard tradeoffs and decisions," said Eric Bachman, founder and CEO of Golden Gateway Financial. "This is the worst possible time for the 40 percent of seniors now considering delaying retirement to be searching for jobs. It’s unfortunate that the hopes and dreams of these retirees are being put on hold."
Before the economic crisis, 67 percent of respondents planned to retire before age 70
Now, the number of seniors planning to retire by age 70 dropped to 40 percent
Before the economic crisis, 30 percent of those surveyed planned to retire after age 70
Now, almost 50 percent of seniors plan to retire after age 70. More than 40 percent of seniors polled said the current economy has had some kind of negative affect on their ability to retire. More than 50 percent of respondents said they are concerned that their overall net worth may no longer be enough to sustain their retirement. 86 percent of seniors said they had a reasonable understanding of their net worth, and 50 percent said that net worth had declined by between 10 and 30 percent .
6/22/2009
Is a Reverse Mortgage Right for You?
Is a Reverse Mortgage Right for You?
June 17, 2009 10:24 AM ET Philip Moeller
Since the credit and housing meltdown largely removed private reverse mortgages from the market, home equity conversion mortgages (HECMs)—federally insured reverse mortgages—have been growing steadily.
Now, with housing activity improving in most markets, the time is right for homeowners age 62 and older to see if a HECM might work for them. The loans have been controversial, and they are complicated, which is one reason that consumer counseling is a required component of the HECM loan process.
Pros
The benefits of a HECM loan are that people get to stay in their homes as long as they wish without making further mortgage payments. They can access the available equity in their home whenever they want, and that amount of money is guaranteed to them because their loan is federally insured. They retain the title to the home until they leave, and any untapped equity or price appreciation can be captured by them or their heirs by selling the home. If they've stayed in the home so long that they owe more money on the HECM loan than the home is worth, they can simply walk away with no financial obligations under HECM's nonrecourse loan rules.
Cons.
The downside of a HECM is that fees and closing costs can be steep. Also, a fair-sized percentage of a home's equity must be set aside to cover future interest payments on the loan funds that lenders have committed to pay to the borrowers. Some private firms selling HECMs have been charged with misleading and overly aggressive sales tactics. And some borrowers have been encouraged to use the loan proceeds to make risky or unwise investments.
Safeguards. Last week, the comptroller of the currency, John C. Dugan, compared reverse mortgages to subprime loans. Because borrowers need not provide financial information or credit scores to qualify for a HECM, he noted, it's not clear whether they have the financial ability to maintain the home and stay current on insurance and property taxes. Failure to do so is grounds for the lender to take over the home, and Dugan urged regulators to develop stronger consumer safeguards to weed out unqualified borrowers.
An official with the Federal Housing Administration, which oversees the HECM program, says such defaults are less than 1 percent of HECM loans but that regulations will be proposed later this year to require lenders to seek financial information from loan applicants and to include set-asides for home insurance and taxes if they feel the borrower will have trouble keeping up with such payments.
Here are eight questions you should answer to determine if a HECM is a good idea for you.
1. Will you need to access the equity in your home now or in the near future? In planning your future housing and income needs, this is where to start. If you don't have a plan, it's probably wise to avoid a HECM or any other big-ticket financial decision. Under President Obama's stimulus program, the upper limit of an insured HECM loan was raised to $625,000 until the end of this year, at which time it falls back to $417,000. So if you have a home in that upper range, there is time pressure to consider a HECM. Jeff Lewis, chairman of HECM lender Generation Mortgage, says HECM terms are very favorable to borrowers and are unlikely to get any better, particularly with interest rates trending higher.
2. Is selling your home an attractive option? Current market conditions may make it hard to sell your home for what you feel it's worth. But if you can sell your home, you would net a lot more money than through a HECM. If you need the money and are not concerned about affording a new place to live, then a HECM doesn't make sense.
3. Can you qualify for a traditional mortgage to access equity in your home? If you own your home or most of it, is your income and credit profile suitable to take out a new loan on the home? Many older homeowners have insufficient income to qualify for a new loan on their homes, and taking on new debt usually is not a good idea for older consumers.
4. If you have a mortgage, can you afford to keep paying it when you retire? Some homeowners may have enough equity to qualify for a HECM, and their goal is not so much to pull money out of their home as to stop making mortgage payments and reduce their retirement budgets.
5. What should you expect to get out of a HECM loan? The most widely used loan calculator (See upper left hand corner of this Blog for calculator) will allow you to determine how much money you'd get from a HECM loan. The key variables are the size of any outstanding mortgage on the home, prevailing interest rates, and your age—older borrowers get better terms because lenders assume they will remain in their homes for shorter times than younger borrowers. A very rough guide, the FHA official says, is that borrowers will get access to a percentage of the home's value equal to their age...
6. How long will you be able to stay in your home? HECM fees can be steep. The lender's fee is capped at $6,000, and borrowers must make upfront payments for the federal insurance premium and other closing costs. They also would have to (set-aside a certain amount of equity)to pay for monthly loan servicing fees charged by the lender, but any unused portion of that set-aside is returned to the borrower when the home is vacated...
...A 75-year-old borrower, for example, would be able to access about $271,500 on a home valued at $417,000 and would pay $24,500 in loan-related charges. The include: origination
fee ($6.000), FHA insurance ($8.340), servicing set-aside* ($4,563)*, and other closing
costs ($5,659).
* The servicing set-aside is not a cash fee, but is a reduction in the amount of equity you can borrow. Unused set-aside is returned when you leave the property.
7. Does your home qualify for the HECM program? The FHA says you must be at least 62 years old, continue to live in the home, and either own it outright or have a mortgage that can be paid off at closing with available HECM proceeds. Single-family and one-to-four-unit homes qualify (you must live in one of the units), the FHA says, along with condominiums and manufactured homes that meet applicable federal standards.
8. Do you already have a reverse mortgage and don't know it? Lewis says he regularly makes presentations and asks audience members if they have a reverse mortgage. Few hands are raised. Then he asks them whether their children and other family members regularly provide substantial amounts of money for household expenses. Many hands go up. "There's a tendency for reverse mortgages to be done informally in families," he says. "Children provide money regularly to their parents and expect to be paid back when their parents die or sell the house. As an alternative to this, people should explore a HECM."
June 17, 2009 10:24 AM ET Philip Moeller
Since the credit and housing meltdown largely removed private reverse mortgages from the market, home equity conversion mortgages (HECMs)—federally insured reverse mortgages—have been growing steadily.
Now, with housing activity improving in most markets, the time is right for homeowners age 62 and older to see if a HECM might work for them. The loans have been controversial, and they are complicated, which is one reason that consumer counseling is a required component of the HECM loan process.
Pros
The benefits of a HECM loan are that people get to stay in their homes as long as they wish without making further mortgage payments. They can access the available equity in their home whenever they want, and that amount of money is guaranteed to them because their loan is federally insured. They retain the title to the home until they leave, and any untapped equity or price appreciation can be captured by them or their heirs by selling the home. If they've stayed in the home so long that they owe more money on the HECM loan than the home is worth, they can simply walk away with no financial obligations under HECM's nonrecourse loan rules.
Cons.
The downside of a HECM is that fees and closing costs can be steep. Also, a fair-sized percentage of a home's equity must be set aside to cover future interest payments on the loan funds that lenders have committed to pay to the borrowers. Some private firms selling HECMs have been charged with misleading and overly aggressive sales tactics. And some borrowers have been encouraged to use the loan proceeds to make risky or unwise investments.
Safeguards. Last week, the comptroller of the currency, John C. Dugan, compared reverse mortgages to subprime loans. Because borrowers need not provide financial information or credit scores to qualify for a HECM, he noted, it's not clear whether they have the financial ability to maintain the home and stay current on insurance and property taxes. Failure to do so is grounds for the lender to take over the home, and Dugan urged regulators to develop stronger consumer safeguards to weed out unqualified borrowers.
An official with the Federal Housing Administration, which oversees the HECM program, says such defaults are less than 1 percent of HECM loans but that regulations will be proposed later this year to require lenders to seek financial information from loan applicants and to include set-asides for home insurance and taxes if they feel the borrower will have trouble keeping up with such payments.
Here are eight questions you should answer to determine if a HECM is a good idea for you.
1. Will you need to access the equity in your home now or in the near future? In planning your future housing and income needs, this is where to start. If you don't have a plan, it's probably wise to avoid a HECM or any other big-ticket financial decision. Under President Obama's stimulus program, the upper limit of an insured HECM loan was raised to $625,000 until the end of this year, at which time it falls back to $417,000. So if you have a home in that upper range, there is time pressure to consider a HECM. Jeff Lewis, chairman of HECM lender Generation Mortgage, says HECM terms are very favorable to borrowers and are unlikely to get any better, particularly with interest rates trending higher.
2. Is selling your home an attractive option? Current market conditions may make it hard to sell your home for what you feel it's worth. But if you can sell your home, you would net a lot more money than through a HECM. If you need the money and are not concerned about affording a new place to live, then a HECM doesn't make sense.
3. Can you qualify for a traditional mortgage to access equity in your home? If you own your home or most of it, is your income and credit profile suitable to take out a new loan on the home? Many older homeowners have insufficient income to qualify for a new loan on their homes, and taking on new debt usually is not a good idea for older consumers.
4. If you have a mortgage, can you afford to keep paying it when you retire? Some homeowners may have enough equity to qualify for a HECM, and their goal is not so much to pull money out of their home as to stop making mortgage payments and reduce their retirement budgets.
5. What should you expect to get out of a HECM loan? The most widely used loan calculator (See upper left hand corner of this Blog for calculator) will allow you to determine how much money you'd get from a HECM loan. The key variables are the size of any outstanding mortgage on the home, prevailing interest rates, and your age—older borrowers get better terms because lenders assume they will remain in their homes for shorter times than younger borrowers. A very rough guide, the FHA official says, is that borrowers will get access to a percentage of the home's value equal to their age...
6. How long will you be able to stay in your home? HECM fees can be steep. The lender's fee is capped at $6,000, and borrowers must make upfront payments for the federal insurance premium and other closing costs. They also would have to (set-aside a certain amount of equity)to pay for monthly loan servicing fees charged by the lender, but any unused portion of that set-aside is returned to the borrower when the home is vacated...
...A 75-year-old borrower, for example, would be able to access about $271,500 on a home valued at $417,000 and would pay $24,500 in loan-related charges. The include: origination
fee ($6.000), FHA insurance ($8.340), servicing set-aside* ($4,563)*, and other closing
costs ($5,659).
* The servicing set-aside is not a cash fee, but is a reduction in the amount of equity you can borrow. Unused set-aside is returned when you leave the property.
7. Does your home qualify for the HECM program? The FHA says you must be at least 62 years old, continue to live in the home, and either own it outright or have a mortgage that can be paid off at closing with available HECM proceeds. Single-family and one-to-four-unit homes qualify (you must live in one of the units), the FHA says, along with condominiums and manufactured homes that meet applicable federal standards.
8. Do you already have a reverse mortgage and don't know it? Lewis says he regularly makes presentations and asks audience members if they have a reverse mortgage. Few hands are raised. Then he asks them whether their children and other family members regularly provide substantial amounts of money for household expenses. Many hands go up. "There's a tendency for reverse mortgages to be done informally in families," he says. "Children provide money regularly to their parents and expect to be paid back when their parents die or sell the house. As an alternative to this, people should explore a HECM."
Decisions About Reverse Mortgages
Hope, worries over reverse mortgages
By Christina Rexrode
Posted: Sunday, Jun. 21, 2009
Doris Simmons, 69, of Indian Trail, says she carefully considered the downsides of a reverse mortgage and decided it was her best option when the recession started to hurt her business.
She's heard all the objections, like the critics who say you can usually get more money by selling your house. “Not in today's economy,” she replies, and she doesn't really want to move anyway. Her house has been in the family for 50 years and brings memories of her children.
She's a little bothered that the reverse mortgage will probably prevent her from leaving the house to her heirs, but “it's better than defaulting and losing it.”
‘A last resort'
Comptroller of the Currency John Dugan gave a speech this month about the risks of reverse mortgages and said he'd like to “get out in front of this issue before real problems develop” – which regulators arguably didn't do with subprime.
Others point out that reverse mortgages are expensive loans, since borrowers can tap only a portion of their equity. Usually, borrowers can get more money by selling their houses outright, or get cheaper terms by taking out a home-equity loans. “Generally it's kind of a last resort,” said Tom Pemberton, of Pemberton Financial Planning in Charlotte.
Still, the Federal Housing Administration praises reverse mortgages as a great option for a subset of borrowers, as do Bank of America Corp., Wells Fargo & Co. and the other banks that provide them. The banks get fees and interest. “We have seniors who own their homes free and clear but are struggling to buy food,” added Steve Boland, who runs Bank of America's reverse mortgage division.
Boland said reverse mortgages aren't appropriate for every senior, such as those who plan to move soon or those who are able to qualify for a home-equity loan and are comfortable with making the monthly payments. He and others point out that the government requires seniors to get independent counseling before taking out a reverse mortgage, which cuts down on the possibility of fraud or poor decision making.
Also, a reverse mortgage is probably a better deal than selling off your stock portfolio at the big loss it would currently incur, said Jeff Taylor. He is vice president for the senior products group at Wells Fargo Home Mortgage, and he encouraged his mother to take out a reverse mortgage about 15 years ago.
Meg Burns, director of the FHA's office of single-family program development, said she's heard only positive feedback. “One of the things you hear all the time is how this program made a really big difference in their lifestyle, just in little things, like now they can take their grandchildren to get ice cream,” Burns said.
Solving some problems
Simmons, the Indian Trail woman who took out the reverse mortgage, gets her income from Old Timers, a bar on the outskirts of Matthews. She bought the place in the 1980s so she'd have something to carry her into retirement. “I don't have any kind of retirement stocks, bonds, IRA, whatever,” Simmons said.
That plan worked fine for years, until the recession hit. With construction jobs drying up, the roofers, landscapers and painters who frequent the place have stopped coming around so often, and don't stay as long when they do.
Last year, Simmons fell behind on her house payments, which were about $550 a month. Though she'd bought the house years ago, she still had a payment because she'd taken out a home-equity loan in the late 1990s for business improvements.
She heard about reverse mortgages from a...representative who was helping with the home-equity loan. She'd also heard about them on TV and was skeptical, but met with a housing counselor anyway and eventually decided it was the best option. It's been a double gain: It eliminated her house payment, and gave her extra income to catch up on bills. The reverse mortgage hasn't solved all her problems. She still worries about when traffic will pick up again at Old Timers. “It saved me for the time being,” Simmons said. “Now I've got to worry about saving my business.”
By Christina Rexrode
Posted: Sunday, Jun. 21, 2009
Doris Simmons, 69, of Indian Trail, says she carefully considered the downsides of a reverse mortgage and decided it was her best option when the recession started to hurt her business.
She's heard all the objections, like the critics who say you can usually get more money by selling your house. “Not in today's economy,” she replies, and she doesn't really want to move anyway. Her house has been in the family for 50 years and brings memories of her children.
She's a little bothered that the reverse mortgage will probably prevent her from leaving the house to her heirs, but “it's better than defaulting and losing it.”
‘A last resort'
Comptroller of the Currency John Dugan gave a speech this month about the risks of reverse mortgages and said he'd like to “get out in front of this issue before real problems develop” – which regulators arguably didn't do with subprime.
Others point out that reverse mortgages are expensive loans, since borrowers can tap only a portion of their equity. Usually, borrowers can get more money by selling their houses outright, or get cheaper terms by taking out a home-equity loans. “Generally it's kind of a last resort,” said Tom Pemberton, of Pemberton Financial Planning in Charlotte.
Still, the Federal Housing Administration praises reverse mortgages as a great option for a subset of borrowers, as do Bank of America Corp., Wells Fargo & Co. and the other banks that provide them. The banks get fees and interest. “We have seniors who own their homes free and clear but are struggling to buy food,” added Steve Boland, who runs Bank of America's reverse mortgage division.
Boland said reverse mortgages aren't appropriate for every senior, such as those who plan to move soon or those who are able to qualify for a home-equity loan and are comfortable with making the monthly payments. He and others point out that the government requires seniors to get independent counseling before taking out a reverse mortgage, which cuts down on the possibility of fraud or poor decision making.
Also, a reverse mortgage is probably a better deal than selling off your stock portfolio at the big loss it would currently incur, said Jeff Taylor. He is vice president for the senior products group at Wells Fargo Home Mortgage, and he encouraged his mother to take out a reverse mortgage about 15 years ago.
Meg Burns, director of the FHA's office of single-family program development, said she's heard only positive feedback. “One of the things you hear all the time is how this program made a really big difference in their lifestyle, just in little things, like now they can take their grandchildren to get ice cream,” Burns said.
Solving some problems
Simmons, the Indian Trail woman who took out the reverse mortgage, gets her income from Old Timers, a bar on the outskirts of Matthews. She bought the place in the 1980s so she'd have something to carry her into retirement. “I don't have any kind of retirement stocks, bonds, IRA, whatever,” Simmons said.
That plan worked fine for years, until the recession hit. With construction jobs drying up, the roofers, landscapers and painters who frequent the place have stopped coming around so often, and don't stay as long when they do.
Last year, Simmons fell behind on her house payments, which were about $550 a month. Though she'd bought the house years ago, she still had a payment because she'd taken out a home-equity loan in the late 1990s for business improvements.
She heard about reverse mortgages from a...representative who was helping with the home-equity loan. She'd also heard about them on TV and was skeptical, but met with a housing counselor anyway and eventually decided it was the best option. It's been a double gain: It eliminated her house payment, and gave her extra income to catch up on bills. The reverse mortgage hasn't solved all her problems. She still worries about when traffic will pick up again at Old Timers. “It saved me for the time being,” Simmons said. “Now I've got to worry about saving my business.”
2/25/2009
IT'S OFFICIAL: $625,500 NEW REVERSE MORTGAGE LOAN CAP
What does today's increase in the maximum loan cap on the Reverse Mortgage mean to seniors?
In simple terms - it can add tens of thousands of dollars a homeowner can access from the equity they have in their home. And that extra equity (cash) means that many seniors will now be able to pay off their mortgages, or get enough cash from their home equity that it makes the cost of the money equitable, and gives senior homeowners the actual cash they realistically need to make life better. No monthly mortgage payments are required, but if they wish to make payments they can. But, remember, one of the most important reasons for a Reverse Mortgage is to eliminate the mortgage payment. Below are a couple of examples.
1. A couple in their late 60's (68 and 69 years of age) with a home valued at $675,000, at today's reverse mortgage interest rate of 2.973% (2.5% Over LIBOR Monthly Index of 0.437%) would get a gross loan of $425,966. If the borrower chooses a program with an interest rate based on U.S. Treasuries they would get $409,000. After deducting an equity set-aside to pay for servicing, and paying costs they would net $382,000-$396,000. These funds could be used any way they wish after any and all liens against the property, such as their current mortgage, are paid off. They would be able to take this cash as monthly payments for life, a line of credit or as a lump sum or any payment combination they desired.
Prior to today, the maximum Reverse Mortgages based on a $417,000 Loan Cap, these borrowers would get between $283,000 - $300,000.
2. An older senior man or woman living alone (80 years of age) with a home valued at $500,000 would get $379,000 to $388,000 gross loan on the new program. The net loan after all set-asides or costs would be $356,000 to $364,o00. They would be able to take this cash as monthly payments for life, a line of credit or as a lump sum or any payment combination they desired, after paying off any mortgage they might have.
On the old program they would have qualified for a gross loan of $316,500 to $323,500 depending on which program they elected, and after setting aside some equity to pay for servicing, and paying loan costs they would have netted approximately $293,000 to $301,000.
So, the new $625,500 loan cap means a significant difference for borrowers - especially in areas where homes are at the high end of home values.
If you'd like to know where you stand, please call or email me at 703/244-8151 or gloria.boone@gmail.com Thank you.
The U.S. Department of Housing and Urban Development published Mortgagee Letter 2009-07, which officially raises the national limit for Home Equity Conversion Mortgages from $417,000 to $625,500 for the balance of 2009. The new limit took effect on the date of publication, February 24, 2009.
According to the Mortgagee Letter, HUD will allow any loan with a case number assigned prior to the publication of ML 2009-07 to close at either $417,000 or $625,500 until April 30.
Darryl Hicks, Vice President Communications
In simple terms - it can add tens of thousands of dollars a homeowner can access from the equity they have in their home. And that extra equity (cash) means that many seniors will now be able to pay off their mortgages, or get enough cash from their home equity that it makes the cost of the money equitable, and gives senior homeowners the actual cash they realistically need to make life better. No monthly mortgage payments are required, but if they wish to make payments they can. But, remember, one of the most important reasons for a Reverse Mortgage is to eliminate the mortgage payment. Below are a couple of examples.
1. A couple in their late 60's (68 and 69 years of age) with a home valued at $675,000, at today's reverse mortgage interest rate of 2.973% (2.5% Over LIBOR Monthly Index of 0.437%) would get a gross loan of $425,966. If the borrower chooses a program with an interest rate based on U.S. Treasuries they would get $409,000. After deducting an equity set-aside to pay for servicing, and paying costs they would net $382,000-$396,000. These funds could be used any way they wish after any and all liens against the property, such as their current mortgage, are paid off. They would be able to take this cash as monthly payments for life, a line of credit or as a lump sum or any payment combination they desired.
Prior to today, the maximum Reverse Mortgages based on a $417,000 Loan Cap, these borrowers would get between $283,000 - $300,000.
2. An older senior man or woman living alone (80 years of age) with a home valued at $500,000 would get $379,000 to $388,000 gross loan on the new program. The net loan after all set-asides or costs would be $356,000 to $364,o00. They would be able to take this cash as monthly payments for life, a line of credit or as a lump sum or any payment combination they desired, after paying off any mortgage they might have.
On the old program they would have qualified for a gross loan of $316,500 to $323,500 depending on which program they elected, and after setting aside some equity to pay for servicing, and paying loan costs they would have netted approximately $293,000 to $301,000.
So, the new $625,500 loan cap means a significant difference for borrowers - especially in areas where homes are at the high end of home values.
If you'd like to know where you stand, please call or email me at 703/244-8151 or gloria.boone@gmail.com Thank you.
FHA Mortgagee Letter
2009-07
Raises Limits to $625,500
From NRMLA this morning: (For those of you not in the Reverse Mortgage industry, this is good news for seniors who live in areas where the home values are REALLY high...)
Mortgagee Letter 2009-07 Raises Limits to $625,500
From NRMLA this morning: (For those of you not in the Reverse Mortgage industry, this is good news for seniors who live in areas where the home values are REALLY high...)
Mortgagee Letter 2009-07 Raises Limits to $625,500
The U.S. Department of Housing and Urban Development published Mortgagee Letter 2009-07, which officially raises the national limit for Home Equity Conversion Mortgages from $417,000 to $625,500 for the balance of 2009. The new limit took effect on the date of publication, February 24, 2009.
According to the Mortgagee Letter, HUD will allow any loan with a case number assigned prior to the publication of ML 2009-07 to close at either $417,000 or $625,500 until April 30.
Loan limits for the special exception areas of Alaska, Hawaii, Guam and the Virgin Islands have a potential higher ceiling in 2009 of $1,094,625 (1-unit), $1,401,300 (2-unit) $1,693,875 (3-unit); and $2,105,100 (4-unit). At the present time, no counties in these areas qualify for limits above the national ceiling of $729,750...
Darryl Hicks, Vice President Communications
2/23/2009
FIVE COMMON MYTHS ABOUT AGING
5 Common Myths About Aging
By Deborah Kotz Posted February 20, 2009If you age well, you shouldn’t have to worry about
becoming frail and senile
Think aging is all about losing your memory and becoming hard of hearing? Think again. Many people sail through the aging process without walkers or pacemakers. In fact, researchers now believe it’s those age-related diseases—diabetes, heart disease, cancer, stroke, osteoporosis, Alzheimer’s—that leave us frail or disabled, rather than the normal aging of our bodies.
Consider this: The vast majority of those who live to be 100 are able to live independently on their own well into their 90’s, and about 15 percent of them have no age-related diseases even after they hit the century mark, according to the New England Centenarian Study.
Here are some other common myths about aging.
1. Losing those few extra pounds will extend your life. Once you hit 75, carrying a little extra weight can be protective. The Baltimore Longitudinal Study of Aging, a 50-year ongoing
study involving 3,000 seniors, has shown that older folks who have a body mass index of 27—about 154 pounds for a 5-foot-4 woman—live longer than everyone else, including those with a "healthy" BMI in the range of 19 to 25.It could be that the body needs a little extra fat to provide sufficient energy to the immune system when it’s, say, fighting off a flu infection, explains Luigi Ferrucci, who heads the BLSA study, conducted at the National Institute on Aging. He emphasizes, though, that obese individuals who have a BMI above 30 should still work with their doctors to get their weight down.
2. You ‘ll need a hearing aid. Granted, some hearing loss is quite common with age; as part of the normal aging process, sensory cells within the ear begin to die off. Still, only 35 percent of 80-year-olds actually need a hearing aid, and some folks in their 90s still have perfect hearing.3. You’re bound to get crotchety and withdrawn. The BLSA study found that our
personalities don’t change much
after age 30. So, if you’re cheerful and gregarious in your 40s, you can expect to be the same in your 80s. Marked personality changes some seniors experience are due not to normal aging but to some related disease like dementia or stroke.4. Senility is inevitable. Sure, you may forget a word or someone’s name here or there, but the senile stereotype of an old person—remember Mr. Magoo?—is a thing of the past. While nearly everyone experiences a certain amount of decline in cognitive abilities as they age, most of us don’t have an actual impairment in memory that severely interferes with our ability to live independently well into old age.
The unlucky ones who do, usually have a memory-robbing disease like Alzheimer’s. "I once interviewed a 104-year-old man from Sardinia for a study I was conducting," recalls Ferrucci. "We first spoke on the phone so I could let him know I was coming to see him. When I arrived two hours later, he had composed a poem about me, the man from Tuscany, [incorporating] various details from our previous conversation."
5. You won’t have the energy to exercise well in your 80s. Ninety is the new 70. Evidence now suggests that people 
who take up exercise later in life—say, at age 70—experience improved heart function by lowering their resting heart rate and increasing their heart mass and the amount of blood pumped with each beat. The BLSA study even found a reduction in heart attacks among older men who took up a high-intensity activity like swimming or running. Older exercisers also experience less shortness of breath and fatigue.
2/19/2009
REVESE MORTGAGE LIMIT RAISED TO $625,500
$625M by Stimulus Bill
Making More Seniors Eligible
Reverse Mortgages may boom with clarification of the new provision allowing new home purchases
Feb. 19, 2009 – Many more senior citizens became eligible to take advantage of the government’s reverse mortgage program this week as the loan limit was raised to $625,500 for the rest of 2009, from the former limit of $417,000.
The temporary increase in the HUD Reverse Mortgage program is included in the Stimulus Bill, signed by President Barack Obama, according to the National Reverse Mortgage Lenders Association (NRMLA).
The NRMLA says the limit will be raised on a temporary basis to 150% of the Freddie Mac Limit for the remainder of 2009, which would put it at $625,500.
HUD normally has different limits for different areas of the country, except in the case of the Home Equity Conversion Mortgage (HECM or “Heck-um”) program which was just changed last year to a national limit of $417,000, according to Cliff Auerswald of the All Reverse Mortgage Company.
Auerswald says this is important because that would seem to indicate that there will be no differences in high cost areas versus areas not considered high cost, that the limit will be $625,500 nationally.
This is very important to senior homeowners who have properties with higher values, especially those who previously had existing mortgages with balances that the traditional reverse mortgage program could not pay off.
With the disappearance of proprietary or jumbo reverse mortgage products, these senior homeowners had nowhere to turn.
“With the passage of this program, senior borrowers with high valued homes may now be able to receive much more money to use for whatever need they may have, including retiring higher existing debt,” according to Auerswald...
...He suggests the following may describe seniors who will be interested in the new higher limits:
● If you have been waiting because your benefit amount would not pay off enough of your existing debt;
● if you had already received a reverse mortgage but were limited in the amount of funds you could receive even though your property was worth considerably more than the current HUD limit; or
● if you find that with the current economic circumstances you must do something to protect your way of life.
Reverse Mortgage Only for Those Age 62 and Older
Reverse mortgages allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.
In a “regular” mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.
To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.
The legislation will only make the limits available until the end of 2009 and then it will be up to Congress to vote to extend that loan amount further.
The new expanded loan limit may create a boom in reverse mortgage activities for senior citizens, and there will most certainly be a boom...(in reverse mortgages that now) allows older Americans to us reverse mortgages to buy new homes.
Auerswald says there is already “a backlog” of applicants waiting for the home purchase program. He says, too that margins and rates fluctuate with reverse mortgages now more than ever in the past.
2/15/2009
THINK: WHAT SHOULD THE NEW RETIREMENT AGE BE???
Official Retirement Age May Soon Be Increased
Reverse Mortgage Advisor, by Admin. Under News.
Posted on February 15, 2009, 11:13 am
The new President Obama Administration is set to carry out a number of major programs aimed at restructuring the economy. The Obama Administration has already promised to take a hard and careful look into some programs designed for seniors such as Medicare and Social Security.
Usually such programs designed for seniors are hardly touched as it is seen as a bad political move. The senior population makes up a viable and major determining block during elections. However these are hard and different times and some major cut backs can be expected.
Times have changed and there can no longer be federal programs that will continue to remain immune to cut backs and pruning. The main reason for all the cutbacks is that the government is bankrupt.
The last term of Clinton’s administration saw the country enjoying four years of surpluses but the succeeding Bush Administration brought in 8 years of deficits.
The Treasury Department put federal debt at $5,674,178,209,886.86 in 2000. By 2008, federal debt has soared to $10,024,724,896,912.49.
It is only wise that Government cuts back on its spending in order to meet up with a number of upcoming costs that must be soon be faced.
The large debt may have been sustainable if the job base and the economy are (sic) growing. Apart from the high level of debt the country continues to import much more than it exports. The rate of unemployment is increasing and a number of states are already facing financial difficulties. It is now clear that the country is experiencing a recession.
It has become imperative that all government programs be resized and restructured to reduce expenditure and waste.
The Washington Post quotes the President as saying, “what we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further. “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.”
It is thus obvious that the president is serious about the issue. Social Security and Medicare may be restructured and resized. If this happens then the age which must be attained to enjoy full benefits of federal senior programs are likely to rise.
While this is still just speculation the current trends make it seem very likely. This is sure to raise the number of reverse mortgages being originated across the US.
According the Post, the President has said most of these adjustments would begin soon when a fiscal responsibility summit would be convened. As soon as the administration is able to jump-start the stock and job market it would begin to look into all these issues
2/14/2009
REVERSE MORTGAGE LIMITS RAISED TO $625,500
A BOON FOR SENIORS: STIMULUS
BILL RAISES REVERSE
MORTGAGES TO $625,500.
Within the Stimulus Bill just passed by both the House of Representatives and the Senate, and now on the way to President Obama for signature (hopefully, by Monday, Feb.16th, President's Day) are a number of provisions that will be helpful to Senior Citizens. Below is an article from AARP which outlines these benefits. For senior's interested in larger Reverse Mortgages, there is good news, indeed, as the maximum cap has been raised over $200,000 from $417,000 to $625,500.
Please read on.....
Gloria
----------------------------------------------------------------------------------
AARP: Stimulus is First Step Toward
Restoring Long-Term Financial
Security for Older Americans
WASHINGTON, Feb. 13 /PRNewswire-FirstCall
In a historic and critical vote, Congress today passed the American Recovery and Reinvestment Act of 2009. Designated as a "key vote" by AARP on behalf of its 40 million members, the elected officials' votes will be posted on AARP's Government Watch site (www.aarp.org/governmentwatch) so that individuals across the nation can see how their elected official voted on this legislation.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070209/NYF043LOGO )
Nancy LeaMond, Executive Vice President at AARP, released the following statement today:
"Unprecedented job loss, loss of savings and investments, and rising numbers of uninsured individuals has forced every American to take notice of this dire moment in history. The passage of the American Recovery and Reinvestment Act of 2009 is a critical moment for Americans young and old and a vital jump start to our ailing economy.
"AARP is pleased to see that Congress included a $250 economic recovery payment for older Americans, veterans and people with disabilities who are not eligible for the Make Work Pay credit.
"Additionally, we are encouraged by the long-term investment made by Congress that brings us steps closer to health care reform. Funding for health information technology, comparative effectiveness research and nurse and primary care training are all essential building blocks for reform and AARP is encouraged by their inclusion in the stimulus bill.
"While this landmark legislation is crucial to addressing our nation's most pressing issues today, many critical issues remain, including bolstering and securing the housing market, protecting homeowners from foreclosure and jumpstarting the credit markets. As an organization that regularly works with both sides of the aisle, we are hopeful for bipartisan solutions to these issues as Congress and the new administration move forward."
In a recent letter from AARP CEO Bill Novelli to House and Senate leadership outlines the most important issues for older Americans in this legislation:
The bill contains many provisions that we believe are paramount to promoting economic growth, assisting those most affected by the economic crisis, and providing the foundation for meeting critical needs, such as health care and the development of livable communities. Among the provisions we agree are especially needed are:
A $250 economic recovery payment for older persons, veterans, and individuals with disabilities who are ineligible to receive a Make Work Pay credit.
A significant increase in Medicaid spending that will help to stimulate the economy as the current economic downturn causes caseloads to rise while revenues plummet.
Essential building blocks for health care reform, including support for health information technology that includes critical privacy protections, health care comparative effectiveness research, and nurse and primary care training. These changes are critical because we cannot fix our economy if we do not address our broken health care system.
--An increase in funding for the Social Security Administration at a time of significant caseload increases.
--Affordable health insurance via subsidized COBRA for those who have lost health coverage along with jobs.
--An extension and increase in unemployment benefits. Over the past twelve months the number of unemployed aged 55 and older has risen by 65 percent.
--An increase in Food Stamps and other nutrition support. Fixed and low-income individuals face unacceptable choices as food costs increase along with the price of medicine and health care.
--An increase in the Weatherization Assistance Program to help low-income and older couples reduce their energy costs.
--A substantial increase in funding for transportation infrastructure projects that expand mobility options, including mass transit, rural and para-transit programs, and improved coordination of human services transportation programs.
--An increase in the loan value limit for FHA-insured reverse equity mortgages that would allow greater numbers of older homeowners to safely tap the equity in their homes to refinance unaffordable mortgages, obtain more suitable housing, pay medical bills or just meet daily living costs.
2/13/2009
AGE 70 IN HUMAN YEARS...TAKES HOME 1ST PLACE
STUMP TAKES IT ALL
To all: I gladly admit it; I'm a total dog-lover and the Westminster Dog Show is something I look forward to each year.
And, what fun it was this year to see a Sussex Spaniel named STUMP, take home the top prize - Best In Show. And where else to applaude him, but a site dedicated to making the lives of seniors more enjoyable.
See Video: Stump: Best in Show
Stump's shiny coat, floppy ears and confident-but-laid-back demeanor stole the hearts of the crowd and the judges. His competition included a giant schnauzer that was the nation's top show dog, a standard poodle with 94 best-in-show wins, a Brussels griffon, a Scottish deerhound, a Scottish terrier and a puli.
"He really is retired this time," his handler Scott Sommer told the Associated Press.
Nearly 2,500 dogs in total were entered at Westminster this year.
The odds were against Stump, the ten-year-old Sussex Spaniel, who won the 133rd annual Westminster Kennel Club dog show.
AGAINST the ODDS:
For one thing STUMP is OLD, a senior in dog years - 10. He re-emerged from retirement after taking a 5 year hiatus from the show ring (Stump won the sporting group in Westminster in 2004).
No purpose, no energy, no p'zazz. Poor Stump, a champion at heart, went a wastin'. He spent 19 long, sad days in a pet hospital. Once recovered, Stump hung tight with his handler, Scott Sommer, living the dog's life!
STUMP LONGS FOR THE GREEN CARPET:
Five days before this show, Sommer took Stump for one last walk on the green carpet at the Garden.
And WOWZER! The old Stump returned, strutting and panting with style. Ears a floppin'. Walking like a champion, happy energy soaring. And, as they say, the rest is DOGstory!
Vegas odds expert John Avello, who compiled odds for this year's Westminster show, gave Stump, the Sussex spaniel odds of 275-to-1 to win it all.
Stump proved that attitude reigns supreme. Age is merely a number. And if your ears are floppy and cute enough, you're a winner no matter.
LIFE LESSONS LEARNED FROM A DOG:
If Stump can, YOU CAN! (Not win the Westminster; but WIN!!!)
Take REALITY and toss it out the window. Odds - shmodds!
YOU make your own rules!
EXPERIENCE matters; age can trump youth!
CLAIM WHAT'S YOURS!!!Be the winner you are; follow your heart, your star, your bliss! Be inspired
----------------------------------------------------------------------------------
Hope you enjoyed this post as much as Stump enjoyed the Dog Show this year
To all: I gladly admit it; I'm a total dog-lover and the Westminster Dog Show is something I look forward to each year.And, what fun it was this year to see a Sussex Spaniel named STUMP, take home the top prize - Best In Show. And where else to applaude him, but a site dedicated to making the lives of seniors more enjoyable.
See Video: Stump: Best in Show
Stump was the underdog, both because of his senior status and his history. As the story goes, he left the show ring in 2004 after winning the sporting group at Westminster and later nearly died from a mysterious medical condition. He is the first of his breed to take top honors. The previous oldest winner was an eight-year-old Papillon in 1999.
Stump's shiny coat, floppy ears and confident-but-laid-back demeanor stole the hearts of the crowd and the judges. His competition included a giant schnauzer that was the nation's top show dog, a standard poodle with 94 best-in-show wins, a Brussels griffon, a Scottish deerhound, a Scottish terrier and a puli.
"He really is retired this time," his handler Scott Sommer told the Associated Press.
Nearly 2,500 dogs in total were entered at Westminster this year.
The odds were against Stump, the ten-year-old Sussex Spaniel, who won the 133rd annual Westminster Kennel Club dog show.
AGAINST the ODDS:
For one thing STUMP is OLD, a senior in dog years - 10. He re-emerged from retirement after taking a 5 year hiatus from the show ring (Stump won the sporting group in Westminster in 2004).
No purpose, no energy, no p'zazz. Poor Stump, a champion at heart, went a wastin'. He spent 19 long, sad days in a pet hospital. Once recovered, Stump hung tight with his handler, Scott Sommer, living the dog's life!
STUMP LONGS FOR THE GREEN CARPET:
Five days before this show, Sommer took Stump for one last walk on the green carpet at the Garden.
And WOWZER! The old Stump returned, strutting and panting with style. Ears a floppin'. Walking like a champion, happy energy soaring. And, as they say, the rest is DOGstory!
Vegas odds expert John Avello, who compiled odds for this year's Westminster show, gave Stump, the Sussex spaniel odds of 275-to-1 to win it all.
Stump proved that attitude reigns supreme. Age is merely a number. And if your ears are floppy and cute enough, you're a winner no matter.
LIFE LESSONS LEARNED FROM A DOG:If Stump can, YOU CAN! (Not win the Westminster; but WIN!!!)
Take REALITY and toss it out the window. Odds - shmodds!
YOU make your own rules!
EXPERIENCE matters; age can trump youth!
CLAIM WHAT'S YOURS!!!Be the winner you are; follow your heart, your star, your bliss! Be inspired
----------------------------------------------------------------------------------
Hope you enjoyed this post as much as Stump enjoyed the Dog Show this year
2/12/2009
REVERSE MORTGAGE LOAN LOOKS TO BE $625,500
STIMULUS BILL COMPROMISE INCREASES
REVERSE MORTGAGE CAP TO $625,500
(For those that need a Jumbo this is great news)
NRMLA is pleased to announce that we have learned that the compromise package emerging from the House-Senate conference committee includes the House language setting the HECM loan limit at 150% of the Freddie Mac limit, which would put it at $625,500 -- for the balance of 2009 only. (Congress would have to act on it again before this year is out to extend it beyond '09.)
The conference report must still be voted on separately by the House and the Senate, so it is not yet entirely final.
The House adopted a non-binding motion on Tuesday that directs the conference report be posted on the Internet for 48 hours before the House votes. That would put the House floor vote the evening of Feb. 14, at the earliest, if the conference report is posted today.
Once both houses of Congress approve the conference report, it will be sent to President Obama for his signature.
After the President signs the bill, HUD will have to issue a Mortgagee Letter to implement the change. From our previous experience, we have learned that there is no telling exactly how long it will take for them to get this done, but with the temporary nature of this provision, I hope that they will act expeditiously.
We are still waiting to verify that this is correct by seeing the actual conference report.
Peter H. Bell, President
REVERSE MORTGAGE CAP TO $625,500
(For those that need a Jumbo this is great news)
NRMLA is pleased to announce that we have learned that the compromise package emerging from the House-Senate conference committee includes the House language setting the HECM loan limit at 150% of the Freddie Mac limit, which would put it at $625,500 -- for the balance of 2009 only. (Congress would have to act on it again before this year is out to extend it beyond '09.)
The conference report must still be voted on separately by the House and the Senate, so it is not yet entirely final.
The House adopted a non-binding motion on Tuesday that directs the conference report be posted on the Internet for 48 hours before the House votes. That would put the House floor vote the evening of Feb. 14, at the earliest, if the conference report is posted today.
Once both houses of Congress approve the conference report, it will be sent to President Obama for his signature.
After the President signs the bill, HUD will have to issue a Mortgagee Letter to implement the change. From our previous experience, we have learned that there is no telling exactly how long it will take for them to get this done, but with the temporary nature of this provision, I hope that they will act expeditiously.
We are still waiting to verify that this is correct by seeing the actual conference report.
Peter H. Bell, President
Buy Your Retirement Home with a Reverse Mortgage
To all: Financial news has been dark, and perhaps for seniors the darkest of all as retirement income is cut and others desiring to retire must continue to work. But there is, at least, one bright spot: reverse mortgages can now be used to purchase a home.
Imagine being able to sell your home, use some of or all of the equity you get as the down payment on the retirement home you have yearned for, and pay for the balance of this home with a mortgage that will not require any mortgage payments, and also has no credit, income or asset qualifications! This , of course, is a bit of a simplification, but is nontheless true.
A reverse mortgage, that has NO monthly mortgage payments can now be used to purchase property. Please refer to other articles in this blog (Buy A House With No Mortgage Payment) that will explain how a reverse mortgage can be used to purchase a home, and/or write or call me for specific details for your situation.
Have a great day!
Gloria
gloria.boone@gmail.com
703-244-8151
Home sweet retirement home...(especially when purchased with a Reverse Mortgage. gb)
By Dan Kadlec, Money Magazine contributing writer
February 11, 2009: 6:08 AM ET
With prices down by a third in many markets, it may be time to start shopping for the house you want to end up in.
Discount Territory for Retirement
Since 2006, home values in many retirement areas have fallen 30% or more vs23% average drop in house prices nationwide.
City Average Home Price Drop since peak
Naples, Fla. $350,843 -38%
Las Vegas $215,542 -36%
Phoenix $203,151 -32%
Source:SOURCES: S&P Case-Shiller; Zillow.com.
My wife and I recently swallowed hard and bought a tiny cabin on a prime lake-front lot near the Berkshire hills in western Massachusetts where we'd like to retire one day. (At a later date, we'll build a bigger house.) Were we early, buying before housing prices hit rock bottom? Almost certainly. Are we losing sleep over it? Absolutely not.
We love knowing we've locked up a fantastic piece of property at 20% below the asking price - the price it might have fetched a few years ago. Now we're enjoying planning for our retirement in specifics - and meanwhile, spending as much time in our Berkshires retreat as we are able to.
If you also dream of retiring to an idyllic waterfront locale, a country plot or an active-adult community, you may similarly find that now is the right time to buy - or at least to start looking in earnest. Prices in once frothy retirement havens like Las Vegas, Naples, Fla. and Phoenix have tumbled more than 30% since peaking in 2006.
Sure, values may go lower still, given forecasts that the housing market will stay soft through 2009. Picking the exact bottom is a dicey game, however. And in any case, the question that matters most to retirement buyers is not what price the house you want will sell for next year but whether it will be worth more than what you paid for it in, say, 10 or 15 years.
Framed that way, the values in retirement homes right now are compelling in many areas. The following steps can help you decide if you're ready to make this leap and, if so, how to land the best deal.
Know what you can afford
Before you spend time and energy scouting properties, make sure you can clear the hurdles that buying now may present. Financing remains tight, so you'll need stellar credit (740 or higher) to qualify for the lowest mortgage rate. Then too, spending money on a second home isn't wise if your job could be in jeopardy because of the recession. And if your nest egg has been seriously dented by falling stocks, you'd be better off putting extra cash into rebuilding it, not carrying the costs of two properties. If these aren't obstacles for you, let the shopping begin.
Pick your sweet spot
The current downturn has hit virtually every corner of the market. So you can find deals almost anywhere; the trick is to home in on locales where the houses also have a good shot at maintaining their value going forward and eventually appreciating.
Your best bet: areas with large employers in growth industries such as health care and technology or that offer other extras that will help fuel expansion. Examples include the new airport planned for Panama City Beach, Fla. and the Goldilocks weather (not too hot, not too cold) in the Carolinas, which have seen a recent influx of new residents from the Deep South, typically former northerners who are coming partway back up the coast to recapture a taste of the four seasons.
If you prefer an active-adult community, you'll find the best values in complexes completed more than five years ago. "You won't get the very latest and greatest amenities," warns Rebecca Stahr, a consultant to adult-community builders at LifeSpring Environs in Atlanta. But that's why prices of these homes have fallen more than those of newer ones - other buyers are likely to favor newer developments that offer lots of on-site facilities like restaurants and spas.
Warning: Stay away from projects that aren't finished, no matter how many free upgrades the developer offers. Builders' struggles mean that construction sites may stay in the construction phase for quite a while.
Drive a hard bargain
Offering 10% less than recent sales is a good starting point; a 20% haircut is okay if you're worried about further drops in the market. If you get a cold response, you can always raise the offer and possibly still walk away with a good deal.
Work with an ally
Normally, real estate agents are legally bound to work on behalf of the seller to land the highest price. But you can choose instead to work with an agent accredited to represent the buyer; in this case, the legal obligation is reversed and the broker is compelled to use her understanding of the seller and the property to extract the lowest price on your behalf. (Find a buyer-agent through referrals or at rebac.net.)
True, the agent still draws her fee from the sales commission so her loyalties, unofficially, may be divided. But given the turbulence of the market, you gain an advantage by working with a knowledgeable partner. Says Carroll: "At times like these it pays to have an advocate."
Dan Kadlec is co-author of The Power Years, a guide for boomers. E-mail him at boom_years@moneymail.com.
Imagine being able to sell your home, use some of or all of the equity you get as the down payment on the retirement home you have yearned for, and pay for the balance of this home with a mortgage that will not require any mortgage payments, and also has no credit, income or asset qualifications! This , of course, is a bit of a simplification, but is nontheless true.
A reverse mortgage, that has NO monthly mortgage payments can now be used to purchase property. Please refer to other articles in this blog (Buy A House With No Mortgage Payment) that will explain how a reverse mortgage can be used to purchase a home, and/or write or call me for specific details for your situation.
Have a great day!
Gloria
gloria.boone@gmail.com
703-244-8151
Home sweet retirement home...(especially when purchased with a Reverse Mortgage. gb)
By Dan Kadlec, Money Magazine contributing writer
February 11, 2009: 6:08 AM ET
With prices down by a third in many markets, it may be time to start shopping for the house you want to end up in.
Discount Territory for Retirement
Since 2006, home values in many retirement areas have fallen 30% or more vs23% average drop in house prices nationwide.
City Average Home Price Drop since peak
Naples, Fla. $350,843 -38%
Las Vegas $215,542 -36%
Phoenix $203,151 -32%
Source:SOURCES: S&P Case-Shiller; Zillow.com.
My wife and I recently swallowed hard and bought a tiny cabin on a prime lake-front lot near the Berkshire hills in western Massachusetts where we'd like to retire one day. (At a later date, we'll build a bigger house.) Were we early, buying before housing prices hit rock bottom? Almost certainly. Are we losing sleep over it? Absolutely not.
We love knowing we've locked up a fantastic piece of property at 20% below the asking price - the price it might have fetched a few years ago. Now we're enjoying planning for our retirement in specifics - and meanwhile, spending as much time in our Berkshires retreat as we are able to.
If you also dream of retiring to an idyllic waterfront locale, a country plot or an active-adult community, you may similarly find that now is the right time to buy - or at least to start looking in earnest. Prices in once frothy retirement havens like Las Vegas, Naples, Fla. and Phoenix have tumbled more than 30% since peaking in 2006.
Sure, values may go lower still, given forecasts that the housing market will stay soft through 2009. Picking the exact bottom is a dicey game, however. And in any case, the question that matters most to retirement buyers is not what price the house you want will sell for next year but whether it will be worth more than what you paid for it in, say, 10 or 15 years.
Framed that way, the values in retirement homes right now are compelling in many areas. The following steps can help you decide if you're ready to make this leap and, if so, how to land the best deal.
Know what you can afford
Before you spend time and energy scouting properties, make sure you can clear the hurdles that buying now may present. Financing remains tight, so you'll need stellar credit (740 or higher) to qualify for the lowest mortgage rate. Then too, spending money on a second home isn't wise if your job could be in jeopardy because of the recession. And if your nest egg has been seriously dented by falling stocks, you'd be better off putting extra cash into rebuilding it, not carrying the costs of two properties. If these aren't obstacles for you, let the shopping begin.
Pick your sweet spot
The current downturn has hit virtually every corner of the market. So you can find deals almost anywhere; the trick is to home in on locales where the houses also have a good shot at maintaining their value going forward and eventually appreciating.
Your best bet: areas with large employers in growth industries such as health care and technology or that offer other extras that will help fuel expansion. Examples include the new airport planned for Panama City Beach, Fla. and the Goldilocks weather (not too hot, not too cold) in the Carolinas, which have seen a recent influx of new residents from the Deep South, typically former northerners who are coming partway back up the coast to recapture a taste of the four seasons.
If you prefer an active-adult community, you'll find the best values in complexes completed more than five years ago. "You won't get the very latest and greatest amenities," warns Rebecca Stahr, a consultant to adult-community builders at LifeSpring Environs in Atlanta. But that's why prices of these homes have fallen more than those of newer ones - other buyers are likely to favor newer developments that offer lots of on-site facilities like restaurants and spas.
Warning: Stay away from projects that aren't finished, no matter how many free upgrades the developer offers. Builders' struggles mean that construction sites may stay in the construction phase for quite a while.
Drive a hard bargain
Offering 10% less than recent sales is a good starting point; a 20% haircut is okay if you're worried about further drops in the market. If you get a cold response, you can always raise the offer and possibly still walk away with a good deal.
Work with an ally
Normally, real estate agents are legally bound to work on behalf of the seller to land the highest price. But you can choose instead to work with an agent accredited to represent the buyer; in this case, the legal obligation is reversed and the broker is compelled to use her understanding of the seller and the property to extract the lowest price on your behalf. (Find a buyer-agent through referrals or at rebac.net.)
True, the agent still draws her fee from the sales commission so her loyalties, unofficially, may be divided. But given the turbulence of the market, you gain an advantage by working with a knowledgeable partner. Says Carroll: "At times like these it pays to have an advocate."
Dan Kadlec is co-author of The Power Years, a guide for boomers. E-mail him at boom_years@moneymail.com.
2/10/2009
Steps of a Reverse Mortgage
How To Obtain a Reverse Mortgage
For an increasingly large number of senior homeowners, reverse mortgages are an attractive financing option that affords them the opportunity to remain in their own homes and receive much-needed funds.
A reverse mortgage is an exact replica of a traditional mortgage-in reverse. Instead of repaying a lender, homeowners utilize the equity they have built up in their homes to receive payments from the lender.
Eligibility
There are several criteria that must be met before a consumer is eligible for a reverse mortgage. Potential borrowers must be 62 years of age or older and live in their own home. Borrowers must also own their homes outright or have significant equity in their homes. Individuals with remaining balances on a first or second mortgage may be eligible for a reverse mortgage, but those mortgages will have to be paid off with the proceeds from the loan first. Single-family homes, manufactured homes, condominiums, and townhomes are all eligible properties.
There are no income, credit, or employment requirements to qualify for a reverse mortgage. The amount a borrower receives is dependent on age, interest rates, and the overall value of their home. Older borrowers will generally receive more than younger borrowers and home values are a major factor in determining the payout amount of the loan.
Borrowers are required to meet with a reverse mortgage counselor before obtaining a loan. Counselors are independent professionals who provide education about the mortgages and can suggest other alternatives. For a list of counseling agencies approved by the U.S. Department of Housing and Urban Development, visit www.hud.gov or call (800) 569-4287.
Payment Options
Once a borrower has obtained a reverse mortgage, there are several payment options available to them. A lump sum payment gives borrowers the total amount of the loan in a single payment. Fixed monthly payments allow loan recipients to receive payments for a set time period varying from several months to up to life. A line of credit lets borrowers utilize funds from the loan at any time.
According to the National Reverse Mortgage Lenders Association (NRMLA), “The most popular [payment] option-chosen by more than 60 percent of borrowers-is the line of credit.” The flexibility provided by a line of credit is the primary reason for its popularity.
Using the Funds
The proceeds from a reverse mortgage can generally be used in any way that the borrower desires. Borrowers frequently use the money to fund home repairs or modifications that will make aging in place easier and more comfortable. They may also opt to use the proceeds from the loan to cover rising health care or prescription drug costs. Obtaining money to pay off property tax bills and existing debts are also reasons that borrowers cite for seeking a reverse mortgage. Other consumers are looking for additional funds to enhance their lifestyles. This type of borrower may use the funds from a reverse mortgage to take vacations or purchase luxury items.
Paying Back the Loan
A reverse mortgage is due only when the last remaining borrower moves from the home, dies, or sells the home. Loans are repaid through the sale of the home. Therefore, the amount a borrower owes can never exceed the value of their home. (No assets, other than the house, can be attached by the bank in order to pay back the loan. This is called a non-recourse loan.)
Reverse mortgages have no affect on other assets and any debt associated with the loan cannot pass on to the borrower’s estate. Also, the NRMLA points out that if a home is sold and “the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to . . . [the] estate.”
Popularity of Reverse Mortgages
Reverse Mortgages have grown dramatically in popularity in recent years. The escalating cost of living, combined with the desire of seniors to remain in their own homes for as long as possible, has led to an unprecedented increase in the amount of loans...NRMLA credits this tremendous growth to increased understanding of the consumer protection features that are inherent in reverse mortgages. Such features included standard and capped interest rates, independent counseling, no prepayment penalty, and asset protection, among others.
In the past, reverse mortgages have been misunderstood and have faced many misconceptions. As more seniors receive accurate information, the loans continue to grow in popularity. Reverse mortgages are not the financial solution to every problem, and they are certainly not right for everyone. However, for seniors who wish to remain in their own homes for as long as possible, they are an important option that should be considered...
...Quick Facts about Reverse Mortgages:
Types:
Home Equity Conversion Mortgage (HECM) – This federally-insured private loan program is administered by the Department of Housing and Urban Development (HUD). Like all reverse mortgages, this loan requires that the borrower be 62 years of age or older and own their home or have significant equity in their home. Loan applicants must currently live in the home. Additionally, individuals must complete free mortgage counseling from HUD-approved counseling sources.
Single-purpose reverse mortgages-Provide borrowers with smaller loan amounts to pay for express costs. These mortgages are generally offered by state or local government agencies for a specific reason. Often these loans are used to pay for repairs or home modifications, allowing seniors to remain in their homes. They also may be offered to help pay property taxes. They are not available in all areas; check with your local Office on Aging about loan availability.
Proprietary reverse mortgages- (usually called "jumbo reverse mortgages) Generally the type of loan individuals are referring to when they mention reverse mortgages. These reverse mortgages are not federally insured and are offered by banks, mortgage companies, and other private lenders. Mortgages are backed by the companies that develop them. Although proprietary reverse mortgages are generally more expensive than the other types, there are no restrictions on how the money can be used. Loan advances are generally available to quickly provide borrowers with much needed funds.
General Features of all Reverse Mortgages:
Social Security and Medicare benefits are generally not affected by reverse mortgages. Seniors should consult with a benefits advisor in order to ensure that there will be no change in their benefit status (if they are receiving social security on a special program or are on Medicaid).
Homeowners retain the title to their homes until they die, permanently move from the home, sell the home, or reach the end of their loan period. This is beneficial for seniors because a move is considered permanent only after 12 consecutive months out of the home. Seniors could therefore live in an assisted living or nursing facility for recovery or rehabilitation and return to their homes without affecting their loan.
Reverse mortgages are rising-debt loans. The interest is added to the principal loan balance each month. Therefore, the amount that the loan recipient owes increases significantly with time. At the end of a reverse mortgage term or when the homeowner dies or moves, there will be little or no equity left in the home. There are fewer assets for the homeowner and his or her heirs.
Lenders can determine which fees will be charged and the rates for those fees. Fees include origination fees, closing costs, and servicing fees.
Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole. Homeowners are still responsible for taxes, insurance, utilities, maintenance, and other housing expenses.
Information adapted from the Federal Trade Commission’s consumer article, “Reverse Mortgages: Proceed with Care.” For more information, please visit their website at http://www.ftc.gov/bcp/conline/pubs/homes/rms.htm.
For an increasingly large number of senior homeowners, reverse mortgages are an attractive financing option that affords them the opportunity to remain in their own homes and receive much-needed funds.
A reverse mortgage is an exact replica of a traditional mortgage-in reverse. Instead of repaying a lender, homeowners utilize the equity they have built up in their homes to receive payments from the lender.
Eligibility
There are several criteria that must be met before a consumer is eligible for a reverse mortgage. Potential borrowers must be 62 years of age or older and live in their own home. Borrowers must also own their homes outright or have significant equity in their homes. Individuals with remaining balances on a first or second mortgage may be eligible for a reverse mortgage, but those mortgages will have to be paid off with the proceeds from the loan first. Single-family homes, manufactured homes, condominiums, and townhomes are all eligible properties.
There are no income, credit, or employment requirements to qualify for a reverse mortgage. The amount a borrower receives is dependent on age, interest rates, and the overall value of their home. Older borrowers will generally receive more than younger borrowers and home values are a major factor in determining the payout amount of the loan.
Borrowers are required to meet with a reverse mortgage counselor before obtaining a loan. Counselors are independent professionals who provide education about the mortgages and can suggest other alternatives. For a list of counseling agencies approved by the U.S. Department of Housing and Urban Development, visit www.hud.gov or call (800) 569-4287.
Payment Options
Once a borrower has obtained a reverse mortgage, there are several payment options available to them. A lump sum payment gives borrowers the total amount of the loan in a single payment. Fixed monthly payments allow loan recipients to receive payments for a set time period varying from several months to up to life. A line of credit lets borrowers utilize funds from the loan at any time.
According to the National Reverse Mortgage Lenders Association (NRMLA), “The most popular [payment] option-chosen by more than 60 percent of borrowers-is the line of credit.” The flexibility provided by a line of credit is the primary reason for its popularity.
Using the Funds
The proceeds from a reverse mortgage can generally be used in any way that the borrower desires. Borrowers frequently use the money to fund home repairs or modifications that will make aging in place easier and more comfortable. They may also opt to use the proceeds from the loan to cover rising health care or prescription drug costs. Obtaining money to pay off property tax bills and existing debts are also reasons that borrowers cite for seeking a reverse mortgage. Other consumers are looking for additional funds to enhance their lifestyles. This type of borrower may use the funds from a reverse mortgage to take vacations or purchase luxury items.
Paying Back the Loan
A reverse mortgage is due only when the last remaining borrower moves from the home, dies, or sells the home. Loans are repaid through the sale of the home. Therefore, the amount a borrower owes can never exceed the value of their home. (No assets, other than the house, can be attached by the bank in order to pay back the loan. This is called a non-recourse loan.)
Reverse mortgages have no affect on other assets and any debt associated with the loan cannot pass on to the borrower’s estate. Also, the NRMLA points out that if a home is sold and “the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to . . . [the] estate.”
Popularity of Reverse Mortgages
Reverse Mortgages have grown dramatically in popularity in recent years. The escalating cost of living, combined with the desire of seniors to remain in their own homes for as long as possible, has led to an unprecedented increase in the amount of loans...NRMLA credits this tremendous growth to increased understanding of the consumer protection features that are inherent in reverse mortgages. Such features included standard and capped interest rates, independent counseling, no prepayment penalty, and asset protection, among others.
In the past, reverse mortgages have been misunderstood and have faced many misconceptions. As more seniors receive accurate information, the loans continue to grow in popularity. Reverse mortgages are not the financial solution to every problem, and they are certainly not right for everyone. However, for seniors who wish to remain in their own homes for as long as possible, they are an important option that should be considered...
...Quick Facts about Reverse Mortgages:
Types:
Home Equity Conversion Mortgage (HECM) – This federally-insured private loan program is administered by the Department of Housing and Urban Development (HUD). Like all reverse mortgages, this loan requires that the borrower be 62 years of age or older and own their home or have significant equity in their home. Loan applicants must currently live in the home. Additionally, individuals must complete free mortgage counseling from HUD-approved counseling sources.
Single-purpose reverse mortgages-Provide borrowers with smaller loan amounts to pay for express costs. These mortgages are generally offered by state or local government agencies for a specific reason. Often these loans are used to pay for repairs or home modifications, allowing seniors to remain in their homes. They also may be offered to help pay property taxes. They are not available in all areas; check with your local Office on Aging about loan availability.
Proprietary reverse mortgages- (usually called "jumbo reverse mortgages) Generally the type of loan individuals are referring to when they mention reverse mortgages. These reverse mortgages are not federally insured and are offered by banks, mortgage companies, and other private lenders. Mortgages are backed by the companies that develop them. Although proprietary reverse mortgages are generally more expensive than the other types, there are no restrictions on how the money can be used. Loan advances are generally available to quickly provide borrowers with much needed funds.
General Features of all Reverse Mortgages:
Social Security and Medicare benefits are generally not affected by reverse mortgages. Seniors should consult with a benefits advisor in order to ensure that there will be no change in their benefit status (if they are receiving social security on a special program or are on Medicaid).
Homeowners retain the title to their homes until they die, permanently move from the home, sell the home, or reach the end of their loan period. This is beneficial for seniors because a move is considered permanent only after 12 consecutive months out of the home. Seniors could therefore live in an assisted living or nursing facility for recovery or rehabilitation and return to their homes without affecting their loan.
Reverse mortgages are rising-debt loans. The interest is added to the principal loan balance each month. Therefore, the amount that the loan recipient owes increases significantly with time. At the end of a reverse mortgage term or when the homeowner dies or moves, there will be little or no equity left in the home. There are fewer assets for the homeowner and his or her heirs.
Lenders can determine which fees will be charged and the rates for those fees. Fees include origination fees, closing costs, and servicing fees.
Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole. Homeowners are still responsible for taxes, insurance, utilities, maintenance, and other housing expenses.
Information adapted from the Federal Trade Commission’s consumer article, “Reverse Mortgages: Proceed with Care.” For more information, please visit their website at http://www.ftc.gov/bcp/conline/pubs/homes/rms.htm.
2/09/2009
How to Pay Back a Reverse Mortgage.
Boomers Want to Know
By Tony Fama
Special to The Oakland Press
When do I pay back my reverse mortgage? And who is responsible? What exactly happens when the loan becomes due?
They’re good questions, and some of the most common among reverse mortgage clients. So let’s get you some answers.
First, and most important to understand: When you get a reverse mortgage, the lender does not own your home. A reverse mortgage is a loan against the property. The title remains in the name of the borrower(s) and the lender is only repaid the loan balance or home value; whichever is less. No repayment is required until the borrower(s) no longer lives in the house.
When do you pay the loan back?
The loan is due and payable when the last remaining borrower sells the property, permanently leaves the home, or passes away. As long as you are living in your home, you won’t make a single house payment again. When you no longer occupy your home as your principal residence, the loan becomes due.
The amount that is due will include:
• The total funds you received from the mortgage
• The initial fees and closing costs financed as part of the loan
• Accrued interest
Who can pay it back? Let’s go over some specific situations.
1) The borrower decides to sell their home
If the borrower wants to sell their home and move somewhere else, the loan becomes due. The cash advances they have received plus accumulated interest and any upfront costs that were financed initially will be added to the loan balance that must be paid back in order to relocate. When the home is sold, the homeowner can use the money received from the sale of the home to pay off the reverse mortgage. Then any additional income from the sale of the home is theirs to keep.
2) The homeowner moves to an assisted living community or passes away
a. If the homeowner moves to an assisted living community or passes away, the loan becomes due six to twelve months following the date they no longer occupy the home. This allows time for the house to sell so the proceeds can be used to pay off the loan. Then any additional money left over would go to the homeowner or their heirs.
b. Or, if the homeowner or their heirs want to keep the home, repayment can be accomplished by refinancing the existing reverse mortgage into a conventional mortgage loan. Or simply paying off the loan in full and keeping the house.
Hopefully this helps clarify exactly what happens after the reverse mortgage loan matures. Due to the safeguards that have your best interest in mind, when it comes to managing finances and maintaining a comfortable retirement, government-created reverse mortgages are a win-win situation for both the homeowner and their family.
Joel Gurman is Vice President of One Reverse Mortgage, and a regular contributor to www.50plusprime.com.
Tony Fama, a former TV news anchor and investigative reporter, is president and founder of Maria Madeline Project, Inc., parent company of 50 Plus Prime TV and www.50plusprime.com, a social networking site for baby boomers. Tony can be reached at tony.fama@50plusprime.com.
Boomers Want to Know
By Tony Fama
Special to The Oakland Press
When do I pay back my reverse mortgage? And who is responsible? What exactly happens when the loan becomes due?
They’re good questions, and some of the most common among reverse mortgage clients. So let’s get you some answers.
First, and most important to understand: When you get a reverse mortgage, the lender does not own your home. A reverse mortgage is a loan against the property. The title remains in the name of the borrower(s) and the lender is only repaid the loan balance or home value; whichever is less. No repayment is required until the borrower(s) no longer lives in the house.
When do you pay the loan back?
The loan is due and payable when the last remaining borrower sells the property, permanently leaves the home, or passes away. As long as you are living in your home, you won’t make a single house payment again. When you no longer occupy your home as your principal residence, the loan becomes due.
The amount that is due will include:
• The total funds you received from the mortgage
• The initial fees and closing costs financed as part of the loan
• Accrued interest
Who can pay it back? Let’s go over some specific situations.
1) The borrower decides to sell their home
If the borrower wants to sell their home and move somewhere else, the loan becomes due. The cash advances they have received plus accumulated interest and any upfront costs that were financed initially will be added to the loan balance that must be paid back in order to relocate. When the home is sold, the homeowner can use the money received from the sale of the home to pay off the reverse mortgage. Then any additional income from the sale of the home is theirs to keep.
2) The homeowner moves to an assisted living community or passes away
a. If the homeowner moves to an assisted living community or passes away, the loan becomes due six to twelve months following the date they no longer occupy the home. This allows time for the house to sell so the proceeds can be used to pay off the loan. Then any additional money left over would go to the homeowner or their heirs.
b. Or, if the homeowner or their heirs want to keep the home, repayment can be accomplished by refinancing the existing reverse mortgage into a conventional mortgage loan. Or simply paying off the loan in full and keeping the house.
Hopefully this helps clarify exactly what happens after the reverse mortgage loan matures. Due to the safeguards that have your best interest in mind, when it comes to managing finances and maintaining a comfortable retirement, government-created reverse mortgages are a win-win situation for both the homeowner and their family.
Joel Gurman is Vice President of One Reverse Mortgage, and a regular contributor to www.50plusprime.com.
Tony Fama, a former TV news anchor and investigative reporter, is president and founder of Maria Madeline Project, Inc., parent company of 50 Plus Prime TV and www.50plusprime.com, a social networking site for baby boomers. Tony can be reached at tony.fama@50plusprime.com.
2/04/2009
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
1/30/2009
GOOD NEWS: Stimulus Bill May Improve Reverse Mortgage
REVERSE MORTGAGE LIMIT MAY BE RAISED TO $625,500
Hey all......good news. I just read that the Obama Stimulus Bill includes a provision for the reverse mortgage to have a top limit of $625,500...raising it from $417,000 for the rest of 2009. To make the increase permanent, it would have to be approved again, to be permanent, by the Congress later in the year.
But, it's a start...and it's in the right direction!
So, let's watch the stimulus bill closely and see what the Senate does with this boon to senior homeowners.
So many homeowners, because of the housing bubble, and in spite of the downturn in the market and lowering of home values, still need this higher limit in order to get enough equity out of their property to pay off current loans.
As an example... if you have a home that is worth $525,000 and you are 65 years of age, here's what you'd get on a Reverse Mortgage capped at $417,000 or at $625,500.
With the $417,000 loan cap, age 65, today's interest rate: A Gross Loan of $270,665. With a $625,500 cap your loan would be approximately $405,900, based on today's RM formulas. That's a huge difference! Huge. And it would provide for thousands and thousands of senior citizens being able to access financial security. Probably such a huge difference, that a letter to your senator (since the Stimulus Bill is now in the Senate Chamber) would definitely be in order.
Virginia Senators:
Warner, Mark R. - (D - VA) (202) 224-2023
B40C DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
Webb, Jim - (D - VA) (202) 224-4024
144 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
Here's the notice from the Reverse Mortgage Daily:
Yesterday the House of Representatives approved President Obama’s economic recovery plan with vote of 244-188. The text of the bill does include the reverse mortgage provision which was added in response to a request that came jointly from NRMLA and AARP. The provision would set the single national loan limit for HECMs at a higher level than $417,000–for the balance of 2009.
According to the email, it would bring the HECM loan limit to 150% of the Freddie Mac limit, or $625,500.
If the Freddie Mac limit changes, the HECM limit would change commensurately. This change is being offered as a temporary measure, thru 2009 only, because it is part of an emergency economic stimulus package. A permanent change would have to be enacted through a more appropriate housing bill.
Hey all......good news. I just read that the Obama Stimulus Bill includes a provision for the reverse mortgage to have a top limit of $625,500...raising it from $417,000 for the rest of 2009. To make the increase permanent, it would have to be approved again, to be permanent, by the Congress later in the year.
But, it's a start...and it's in the right direction!
So, let's watch the stimulus bill closely and see what the Senate does with this boon to senior homeowners.
So many homeowners, because of the housing bubble, and in spite of the downturn in the market and lowering of home values, still need this higher limit in order to get enough equity out of their property to pay off current loans.
As an example... if you have a home that is worth $525,000 and you are 65 years of age, here's what you'd get on a Reverse Mortgage capped at $417,000 or at $625,500.
With the $417,000 loan cap, age 65, today's interest rate: A Gross Loan of $270,665. With a $625,500 cap your loan would be approximately $405,900, based on today's RM formulas. That's a huge difference! Huge. And it would provide for thousands and thousands of senior citizens being able to access financial security. Probably such a huge difference, that a letter to your senator (since the Stimulus Bill is now in the Senate Chamber) would definitely be in order.
Virginia Senators:
Warner, Mark R. - (D - VA) (202) 224-2023
B40C DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
Webb, Jim - (D - VA) (202) 224-4024
144 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
Here's the notice from the Reverse Mortgage Daily:
Yesterday the House of Representatives approved President Obama’s economic recovery plan with vote of 244-188. The text of the bill does include the reverse mortgage provision which was added in response to a request that came jointly from NRMLA and AARP. The provision would set the single national loan limit for HECMs at a higher level than $417,000–for the balance of 2009.
SEC. 12004. FHA REVERSE MORTGAGE LOAN LIMITS FOR 2009.
For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of
insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).
According to the email, it would bring the HECM loan limit to 150% of the Freddie Mac limit, or $625,500.
If the Freddie Mac limit changes, the HECM limit would change commensurately. This change is being offered as a temporary measure, thru 2009 only, because it is part of an emergency economic stimulus package. A permanent change would have to be enacted through a more appropriate housing bill.
1/27/2009
Ever More Popular Reverse Mortgages: Risks and Rewards (ABC News)
From ABC News Transcript from newshow
and interview of Mellody Hobson,
GMA Financial Contributor
Risks vs. Rewards
GMA Financial Contributor Tells You
How to Qualify, and About Other Options
By MELLODY HOBSON
Jan. 8, 2008 —
There is an increasing trend among senior citizens in need of money for their rising health care and prescription drug costs taking out a reverse mortgage or in essence, getting paid by their home. According to the National Reverse Mortgage Lenders Association, the number of reverse mortgages insured by the U.S. Department of Housing and Urban Development (representing 90 percent of all such loans) has surged from 157 in 1990 to more than 107,558 in 2007, with a forecast of more than 200,000 this year.
The reason?
More than 12.5 million seniors over the age of 65 own their homes free and clear, and are sitting on more than $4 trillion in home equity money which many need to put toward their daily living and medical expenses.
Mellody, can you help us understand how a reverse mortgage works? How is it different from a traditional mortgage or home equity loan?
A reverse mortgage is exactly what it sounds like-- it is the opposite of a traditional mortgage. With a traditional mortgage, you borrow money from a bank to purchase a home and then repay this loan with interest over time. A home equity loan is similar, except you are borrowing against the equity you have built up in your home and repaying that amount with interest over a
specific period of time. When applying for both a mortgage and a home equity loan, there are income thresholds to ensure that you can repay whatever you are borrowing.
Conversely, with a reverse mortgage, there are no income requirements, (or credit score requirement or asset requirements /GB) and the lender essentially pays you to live in your home.
Specifically, the equity you have built up in your home can be paid back to you in one of the following ways: a single lump sum of cash; a regular payout as long as you live in the home; a credit line to be accessed when you need it; or a combination of these options. And, you do not have to repay any of this money until the last borrower dies, sells the home or moves away permanently.
The money you receive from a reverse mortgage can be used for anything, including daily living expenses, medical bills, prescription costs and even home repairs. (And, as of 1-1-09 the funds can be used to purchase a home, and purchase or refinance a Co-Op that meets FHA standards./GB)
Can anyone qualify for a reverse mortgage? What are the costs?
To qualify for a reverse mortgage, you must own your home and be at least 62 years old. The amount you can borrow depends upon your age, how much your home is worth and current interest rates. Additionally, you must meet the following qualifications:
Your home must be your primary residence.
You must have paid off your entire loan or have significant equity built up that your mortgage balance can be paid off with a small portion of the reverse mortgage.
Your home must be in structurally good condition and free of major problems such as termite damage or roof leaks.
In terms of costs, this is where it can get a little tricky. Costs mirror those of typical closing costs on a traditional mortgage and include title insurance, origination and appraisal fees as well as other costs. On average, it might cost $8,000 or $9,000 for a $150,000 loan. Keep in mind, these expenses can be rolled into the amount you receive from the reverse mortgage, so having this cash up front is not necessary..
This all sounds great. Are there any downsides?
There are a few key downsides to keep in mind when considering a reverse mortgage. In addition to the costs I just mentioned, taking advantage of a reverse mortgage may affect your eligibility for state and federal government assistance programs, such as Medicaid.
(standard Social Security and Medicare are not affected by having a reverse mortgage/GB)
Also, once you begin withdrawing equity from your home, there will be less money left over once the home is sold and the loan is repaid meaning less money to pass along to your heirs.
Should seniors be watchful about anything when considering a lender for their reverse mortgage?
Unfortunately, the answer is yes. Cash-strapped seniors are likely targets for predatory lenders and brokers who may try to steer them into loan products which generate significant costs for the borrower (and profits for the lender or broker).
While counseling on the pros and cons of a reverse mortgage is a requirement for federally insured loans which account for the majority of loans today it is not always adequate. If you are wondering whether a reverse mortgage is a good choice for you, try to do as much research on your own about the available options. You also may want to enlist the help of a trusted friend or family member who can help you sift through your finances as well as the details of any potential loan.
So, would you recommend reverse mortgages to seniors?
It really depends on your personal situation. The Federal Trade Commission puts it best... a reverse mortgage is for those who are house rich, but cash poor.
Reverse mortgages can provide a great safety net, but it is important to have a long-term plan in place before making any decisions.
One of the most important benefits of a reverse mortgage is that the lender cannot remove homeowners from their homes as long as they stay current with their property taxes, insurance and home maintenance. This fact alone can provide important security to many seniors.
That said, a reverse mortgage is not necessarily a panacea. And if you live in an area where the housing market is relatively stable (versus depressed), don't forget to consider selling your home and downsizing to a smaller home as an option.
(And, you can get a reverse mortgage, with no qualifying, to help you purchase your new home and thus have no mortgage payments. Also, you might not need all the equity from your current home for a down payment, so it can be added to your savings account. /GB)
Copyright © 2009 ABC News Internet Ventures
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and interview of Mellody Hobson,
GMA Financial Contributor
Risks vs. Rewards
GMA Financial Contributor Tells You
How to Qualify, and About Other Options
By MELLODY HOBSON
Jan. 8, 2008 —
There is an increasing trend among senior citizens in need of money for their rising health care and prescription drug costs taking out a reverse mortgage or in essence, getting paid by their home. According to the National Reverse Mortgage Lenders Association, the number of reverse mortgages insured by the U.S. Department of Housing and Urban Development (representing 90 percent of all such loans) has surged from 157 in 1990 to more than 107,558 in 2007, with a forecast of more than 200,000 this year.
The reason?
More than 12.5 million seniors over the age of 65 own their homes free and clear, and are sitting on more than $4 trillion in home equity money which many need to put toward their daily living and medical expenses.
Mellody, can you help us understand how a reverse mortgage works? How is it different from a traditional mortgage or home equity loan?
A reverse mortgage is exactly what it sounds like-- it is the opposite of a traditional mortgage. With a traditional mortgage, you borrow money from a bank to purchase a home and then repay this loan with interest over time. A home equity loan is similar, except you are borrowing against the equity you have built up in your home and repaying that amount with interest over a
specific period of time. When applying for both a mortgage and a home equity loan, there are income thresholds to ensure that you can repay whatever you are borrowing.Conversely, with a reverse mortgage, there are no income requirements, (or credit score requirement or asset requirements /GB) and the lender essentially pays you to live in your home.
Specifically, the equity you have built up in your home can be paid back to you in one of the following ways: a single lump sum of cash; a regular payout as long as you live in the home; a credit line to be accessed when you need it; or a combination of these options. And, you do not have to repay any of this money until the last borrower dies, sells the home or moves away permanently.
The money you receive from a reverse mortgage can be used for anything, including daily living expenses, medical bills, prescription costs and even home repairs. (And, as of 1-1-09 the funds can be used to purchase a home, and purchase or refinance a Co-Op that meets FHA standards./GB)
Can anyone qualify for a reverse mortgage? What are the costs?
To qualify for a reverse mortgage, you must own your home and be at least 62 years old. The amount you can borrow depends upon your age, how much your home is worth and current interest rates. Additionally, you must meet the following qualifications:
Your home must be your primary residence.
You must have paid off your entire loan or have significant equity built up that your mortgage balance can be paid off with a small portion of the reverse mortgage.
Your home must be in structurally good condition and free of major problems such as termite damage or roof leaks.
In terms of costs, this is where it can get a little tricky. Costs mirror those of typical closing costs on a traditional mortgage and include title insurance, origination and appraisal fees as well as other costs. On average, it might cost $8,000 or $9,000 for a $150,000 loan. Keep in mind, these expenses can be rolled into the amount you receive from the reverse mortgage, so having this cash up front is not necessary..
This all sounds great. Are there any downsides?
There are a few key downsides to keep in mind when considering a reverse mortgage. In addition to the costs I just mentioned, taking advantage of a reverse mortgage may affect your eligibility for state and federal government assistance programs, such as Medicaid.
(standard Social Security and Medicare are not affected by having a reverse mortgage/GB)Also, once you begin withdrawing equity from your home, there will be less money left over once the home is sold and the loan is repaid meaning less money to pass along to your heirs.
Should seniors be watchful about anything when considering a lender for their reverse mortgage?
Unfortunately, the answer is yes. Cash-strapped seniors are likely targets for predatory lenders and brokers who may try to steer them into loan products which generate significant costs for the borrower (and profits for the lender or broker).
While counseling on the pros and cons of a reverse mortgage is a requirement for federally insured loans which account for the majority of loans today it is not always adequate. If you are wondering whether a reverse mortgage is a good choice for you, try to do as much research on your own about the available options. You also may want to enlist the help of a trusted friend or family member who can help you sift through your finances as well as the details of any potential loan.
So, would you recommend reverse mortgages to seniors?
It really depends on your personal situation. The Federal Trade Commission puts it best... a reverse mortgage is for those who are house rich, but cash poor.
Reverse mortgages can provide a great safety net, but it is important to have a long-term plan in place before making any decisions.
One of the most important benefits of a reverse mortgage is that the lender cannot remove homeowners from their homes as long as they stay current with their property taxes, insurance and home maintenance. This fact alone can provide important security to many seniors.
That said, a reverse mortgage is not necessarily a panacea. And if you live in an area where the housing market is relatively stable (versus depressed), don't forget to consider selling your home and downsizing to a smaller home as an option.
(And, you can get a reverse mortgage, with no qualifying, to help you purchase your new home and thus have no mortgage payments. Also, you might not need all the equity from your current home for a down payment, so it can be added to your savings account. /GB)
Copyright © 2009 ABC News Internet Ventures
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1/26/2009
REVERSE MORTGAGE: USE IT TO PURCHASE OR REFINANCE!
Below, a basic article from the Montana "Missoulian" shows that reverse mortgages are becoming popular all over the USA, and that homeowners in states and counties that used to have smaller FHA Reverse Mortgages (because the loan limits were based on county home prices and economics) are now in excellent positions to obtain more needed cash or credit lines from their homes with the new, higher $417,000 nationwide lending limit.
REVERSE MORTGAGE PURCHASES - WITH NO MONTHLY PAYMENT
As of January 1, 2009, Reverse Mortgages may be used to purchase a new (or a replacement principal residence). The purchase Reverse mortgages works this way, generally.
If you currently own a home that is perhaps too big for you, or is older and needs more repair than you want to put into it, and you would like to buy a newer or smaller home, here are the steps to follow.
1. Estimate how much cash you will have after selling your current home.
2. Estimate the price you'd most likely pay for a new home.
3. Give your Reverse Mortgage Specialist this information, as well as your age(s) and the zip code of the new home.
4. Your Reverse Mortgage Specialist will be able to then tell you, based on the price, your age(s), the interest rate, and zip code, how much of a net (amount after costs) Reverse Mortgage you could get on the new home.
5. Take the value of the new home, deduct the amount of the new net (after costs) Reverse Mortgage, and the balance will be what you'll be required to put down on the new home.
6. At the end of the transaction you will have the new home with no mortgage payments - although you will be responsible for taxes and insurance.
7. In addition, since you won't have to use all of your cash-equity out of your old home to purchase the new home, you'll have extra cash to put into savings to use for future needs.
Here's an example of a senior couple who have been able to do this.
1. They sold their current large home for $550,000 and after paying off their current loan and all closing costs, ended up with $285,000 in cash.
2. They moved to another area in their state where housing prices were lower, and where they could live closer to their grandchildren.
3. They were 69 and 67 years of age and selected a home that cost $350,000. Because of the interest rate, their age and the value of the property, they were able to qualify for a net Reverse Mortgage of $210,831 at a monthly interest rate of 2.43%.
They then put down $139,169 from the $285,000 they got on their old house. This left them with $145,837 in cash to add to their savings and investments which they could use any way they pleased.
In addition, there were no credit, income, employment or savings requirements for them to qualify for the loan. And, they will have no monthly mortgage payments - making their social security and other retirement income go further.
It is true that over time they will eat into the money they put down on the new house (their new equity) as interest on the Reverse Mortgage accumulates. Over a 10 or 15 year period, if their home appreciates at approximately 4% a year, the equity will last many years. (Or provide cash-out to them if they sold the new home)
If you would like to explore this option with me, please call me at 703/244-8151 and I will be happy to provide you with detailed information on how much you would get on a Reverse Mortgage, the costs, as well as an amortization sheet showing you just how much you would owe annually, and how much equity you could have left in your property at any given year. Most people will be pleasantly surprised.
But also bear in mind, that if you ever use up your equity and want to stay in the home anyway - that is absolutely your right, and it is written into the program. If, by the time you (all borrowers) have passed on or moved out, and for any reason at all you owe more on the loan than the home is worth, FHA will pay that difference to the lender. Neither you, nor your heirs, would be responsible for that difference, and neither the lender nor the FHA can come after any of your other assets (or inheritance) to pay that difference. This is also written into the documents.
Gloria
703-244-8151
Turning home equity into cash
By BETSY COHEN of the Missoulian
Reverse mortgage: It's a term - and a tool - that is becoming increasingly familiar among the ranks of retirees and lenders.
What is it? It's a viable option for people over the age of 62 who want to stay in their homes but have little or no savings, assets or other cash options to pay their bills.
This is how it works: Senior citizens who own their homes can convert the equity in those homes into cash without having to move out or repay the loan each month, explained Greg Harper, Missoula branch director for the Consumer Credit Counseling Service of Montana.
The money paid to the homeowner, which is usually between 65 percent to 75 percent of the assessed equity, is paid back to the lender when the homeowner sells the home, moves into another living situation or dies and the home is then sold.
Increasingly, more and more seniors are turning to this option, said Peter Bell, president of the National Reverse Mortgage Lenders Association, a nonprofit trade association based in Washington, D.C..
“I think people are cash-constrained in a number of different ways,” Bell said. “And this has become an important tool for people to manage their personal finances.
“The reverse mortgage is used to pay off an existing mortgage (so homeowners have more available money to pay for other living expenses) or to maintain living in the house.”
Federally insured Home Equity Conversion Mortgages (HCEMs) are the most popular reverse mortgages offered, and account for 90 percent of all such mortgages in the United States. In 2008, the number of HCEMs grew by 6.4 percent, amounting to 115,176 loans.
Homeowners in Florida and California lead this emerging trend, according to the Federal Department of Housing and Urban Development, but statistics show Montana homeowners are also riding the swell.
On the ground, it means the Consumer Credit Counseling Service of Montana is busy - very busy - these days, said Tim Robbins, director of counseling for the statewide agency.
“We have been doing counseling for reverse mortgages for four years and we have had a 400 percent increase over the last four years,” Robbins said. “Four years ago, we were counseling between four and six homeowners a month. Now we are seeing about 20 to 25 people a month.”
By federal mandate, anyone who is interested in HCEMs must have third-party counsel before a reverse mortgage is approved. The law not only helps seniors make informed decisions with the help of an objective third party, but it helps protect seniors from predatory lending practices, Robbins explained.
In Montana, the bulk of such counseling takes place in the eight offices of Consumer Credit Counseling Service.
“What we are experiencing is pretty typical of the national trend,” Robbins said. “Reverse mortgages nationally have doubled every year for the last three to four years.”
Several factors are helping to push this once-obscure fiscal tool into the limelight, said Bell, whose D.C. organization keeps track of the niche lending sector.
“There is a snowball effect for people,” he said. “Once they know someone who has gone out and got it, the person who has it becomes the convincer to help the reluctant one move ahead.”
Of course, there are more tangible reasons.
In November, housing legislation cut fees on reverse mortgages while raising the amount that homeowners can borrow against.
In Montana, borrowing caps were once determined county by county, and generally the amount people could borrow against their equity was around $200,000, even if there was more equity in the home.
Today, that limit is $417,000 nationwide, Robbins said.“To have a national limit has really changed things,” he said. “It's given people more options.”
Robbins expects reverse mortgages will only get more popular as people live longer in general, and as more baby boomers - many of whom may be financially strapped in their sunset years - hit retirement age.
It's telling that the watchdog of American aging, the AARP, is tracking the trend on its Web site, www.aarp.org, where there are numerous and current articles that explain the world of reverse mortgages.
“Reverse mortgages are a good tool for certain people,” said Mary Harris, a certified public accountant with the Missoula firm Boyle Deveny & Meyer.
In recent years, more of her clients have asked Harris about the lending option.
“It really works if you don't have other assets to work with,” Harris said. “It actually can be something that can be very useful, something that will allow people to have a good quality of life.
“For a lot of people, their home is their single largest asset, and with a reverse mortgage you don't have to have your mortgage paid off to do it.”While the option has its allure, there are several caveats. “People are using it as a last resort,” Harris said. “This is not a good option for people who want to keep their home debt-free because a reverse mortgage is a debt.”
In all his years as a counselor at Credit Counseling Service of Montana, Harper said he's learned to immediately tell people that reverse mortgages are most helpful to homeowners who have no other financial options.“It can be a very expensive loan up front,” Harper explained. “This isn't the best option if it's for a short-term deal.”
The other, perhaps most important caveat? “Talk to your family and heirs about this,” Harper said. “They are going to be a party to this even if they don't think they are. The ownership of the property is something you will them - and they have to deal with that and the debt that comes with it.”
Copyright © 2009 Missoulian
REVERSE MORTGAGE PURCHASES - WITH NO MONTHLY PAYMENT
As of January 1, 2009, Reverse Mortgages may be used to purchase a new (or a replacement principal residence). The purchase Reverse mortgages works this way, generally.
If you currently own a home that is perhaps too big for you, or is older and needs more repair than you want to put into it, and you would like to buy a newer or smaller home, here are the steps to follow.
1. Estimate how much cash you will have after selling your current home.
2. Estimate the price you'd most likely pay for a new home.
3. Give your Reverse Mortgage Specialist this information, as well as your age(s) and the zip code of the new home.
4. Your Reverse Mortgage Specialist will be able to then tell you, based on the price, your age(s), the interest rate, and zip code, how much of a net (amount after costs) Reverse Mortgage you could get on the new home.
5. Take the value of the new home, deduct the amount of the new net (after costs) Reverse Mortgage, and the balance will be what you'll be required to put down on the new home.
6. At the end of the transaction you will have the new home with no mortgage payments - although you will be responsible for taxes and insurance.
7. In addition, since you won't have to use all of your cash-equity out of your old home to purchase the new home, you'll have extra cash to put into savings to use for future needs.
Here's an example of a senior couple who have been able to do this.
1. They sold their current large home for $550,000 and after paying off their current loan and all closing costs, ended up with $285,000 in cash.
2. They moved to another area in their state where housing prices were lower, and where they could live closer to their grandchildren.
3. They were 69 and 67 years of age and selected a home that cost $350,000. Because of the interest rate, their age and the value of the property, they were able to qualify for a net Reverse Mortgage of $210,831 at a monthly interest rate of 2.43%.
They then put down $139,169 from the $285,000 they got on their old house. This left them with $145,837 in cash to add to their savings and investments which they could use any way they pleased.
In addition, there were no credit, income, employment or savings requirements for them to qualify for the loan. And, they will have no monthly mortgage payments - making their social security and other retirement income go further.
It is true that over time they will eat into the money they put down on the new house (their new equity) as interest on the Reverse Mortgage accumulates. Over a 10 or 15 year period, if their home appreciates at approximately 4% a year, the equity will last many years. (Or provide cash-out to them if they sold the new home)
If you would like to explore this option with me, please call me at 703/244-8151 and I will be happy to provide you with detailed information on how much you would get on a Reverse Mortgage, the costs, as well as an amortization sheet showing you just how much you would owe annually, and how much equity you could have left in your property at any given year. Most people will be pleasantly surprised.
But also bear in mind, that if you ever use up your equity and want to stay in the home anyway - that is absolutely your right, and it is written into the program. If, by the time you (all borrowers) have passed on or moved out, and for any reason at all you owe more on the loan than the home is worth, FHA will pay that difference to the lender. Neither you, nor your heirs, would be responsible for that difference, and neither the lender nor the FHA can come after any of your other assets (or inheritance) to pay that difference. This is also written into the documents.
Gloria
703-244-8151
Turning home equity into cash
By BETSY COHEN of the Missoulian
Reverse mortgage: It's a term - and a tool - that is becoming increasingly familiar among the ranks of retirees and lenders.
What is it? It's a viable option for people over the age of 62 who want to stay in their homes but have little or no savings, assets or other cash options to pay their bills.
This is how it works: Senior citizens who own their homes can convert the equity in those homes into cash without having to move out or repay the loan each month, explained Greg Harper, Missoula branch director for the Consumer Credit Counseling Service of Montana.
The money paid to the homeowner, which is usually between 65 percent to 75 percent of the assessed equity, is paid back to the lender when the homeowner sells the home, moves into another living situation or dies and the home is then sold.
Increasingly, more and more seniors are turning to this option, said Peter Bell, president of the National Reverse Mortgage Lenders Association, a nonprofit trade association based in Washington, D.C..
“I think people are cash-constrained in a number of different ways,” Bell said. “And this has become an important tool for people to manage their personal finances.
“The reverse mortgage is used to pay off an existing mortgage (so homeowners have more available money to pay for other living expenses) or to maintain living in the house.”
Federally insured Home Equity Conversion Mortgages (HCEMs) are the most popular reverse mortgages offered, and account for 90 percent of all such mortgages in the United States. In 2008, the number of HCEMs grew by 6.4 percent, amounting to 115,176 loans.
Homeowners in Florida and California lead this emerging trend, according to the Federal Department of Housing and Urban Development, but statistics show Montana homeowners are also riding the swell.
On the ground, it means the Consumer Credit Counseling Service of Montana is busy - very busy - these days, said Tim Robbins, director of counseling for the statewide agency.
“We have been doing counseling for reverse mortgages for four years and we have had a 400 percent increase over the last four years,” Robbins said. “Four years ago, we were counseling between four and six homeowners a month. Now we are seeing about 20 to 25 people a month.”
By federal mandate, anyone who is interested in HCEMs must have third-party counsel before a reverse mortgage is approved. The law not only helps seniors make informed decisions with the help of an objective third party, but it helps protect seniors from predatory lending practices, Robbins explained.
In Montana, the bulk of such counseling takes place in the eight offices of Consumer Credit Counseling Service.
“What we are experiencing is pretty typical of the national trend,” Robbins said. “Reverse mortgages nationally have doubled every year for the last three to four years.”
Several factors are helping to push this once-obscure fiscal tool into the limelight, said Bell, whose D.C. organization keeps track of the niche lending sector.
“There is a snowball effect for people,” he said. “Once they know someone who has gone out and got it, the person who has it becomes the convincer to help the reluctant one move ahead.”
Of course, there are more tangible reasons.
In November, housing legislation cut fees on reverse mortgages while raising the amount that homeowners can borrow against.
In Montana, borrowing caps were once determined county by county, and generally the amount people could borrow against their equity was around $200,000, even if there was more equity in the home.
Today, that limit is $417,000 nationwide, Robbins said.“To have a national limit has really changed things,” he said. “It's given people more options.”
Robbins expects reverse mortgages will only get more popular as people live longer in general, and as more baby boomers - many of whom may be financially strapped in their sunset years - hit retirement age.
It's telling that the watchdog of American aging, the AARP, is tracking the trend on its Web site, www.aarp.org, where there are numerous and current articles that explain the world of reverse mortgages.
“Reverse mortgages are a good tool for certain people,” said Mary Harris, a certified public accountant with the Missoula firm Boyle Deveny & Meyer.
In recent years, more of her clients have asked Harris about the lending option.
“It really works if you don't have other assets to work with,” Harris said. “It actually can be something that can be very useful, something that will allow people to have a good quality of life.
“For a lot of people, their home is their single largest asset, and with a reverse mortgage you don't have to have your mortgage paid off to do it.”While the option has its allure, there are several caveats. “People are using it as a last resort,” Harris said. “This is not a good option for people who want to keep their home debt-free because a reverse mortgage is a debt.”
In all his years as a counselor at Credit Counseling Service of Montana, Harper said he's learned to immediately tell people that reverse mortgages are most helpful to homeowners who have no other financial options.“It can be a very expensive loan up front,” Harper explained. “This isn't the best option if it's for a short-term deal.”
The other, perhaps most important caveat? “Talk to your family and heirs about this,” Harper said. “They are going to be a party to this even if they don't think they are. The ownership of the property is something you will them - and they have to deal with that and the debt that comes with it.”
Copyright © 2009 Missoulian
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