Reverse Mortgage?

Question

Those of you that HAVE a reverse mortgage or have THOROUGHLY INVESTIGATED its ramifications, please tell us what your experience has been or the merits/shortcomings of them.

Answer 1

A reverse mortgage is a type of loan available to seniors (62 and over in the US), used as a way of converting their home equity (the value of the home, minus the amount of any existing mortgages) into one or more cash payments while retaining ownership of the property (continuing to live there) and avoiding monthly payments. Repayment of the loan is deferred until the borrower is no longer living in the home.

In a typical mortgage, a home owner pays a monthly amortized amount; after each payment, the owner has more equity in the house. After a certain amount of time, the mortgage will be paid in full and the property released from the debt. In a reverse mortgage, the home owner pays nothing each month and all interest on the debt is added to the lien on the property. If the owner receives monthly payments, then the debt on the house increases each month.

If a house gains significantly in value after a reverse mortgage is taken on it, it is possible to get a second and even third reverse mortgage to borrow against the increased equity that the owner now has in the more valuable house. But, in the United States a reverse mortgage must be the first and only mortgage on the property (if there is an existing mortgage, it will be paid off with some of the proceeds from the reverse mortage). In the United States, if the property increases in value (and as the mortgagee ages and qualifies for more money), the reverse mortgage may be refinanced to borrow more against the increased equity.

Reverse mortgages in the United States

Requirements
To qualify for a reverse mortgage in the United States, the borrower must be at least 62. The borrower must pay off any existing mortgage(s) with the proceeds from the reverse mortgage and, if needed, additional personal funds. There are no minimum income or credit requirements, and for most reverse mortgages, the money can be used for any purpose. A pending bankruptcy that has not been finalized may, however, slow the process. Some types of dwellings, such as lower-value mobile homes, do not qualify. Before borrowing, applicants must seek HUD approved counseling[1]. The counseling is a free safeguard for the borrower and his/her family, to make sure they completely understand what a Reverse Mortgage is, and what the process of obtaining one is.

Reverse mortgages are offered by some state and local governments. These "public sector" loans generally must be used for specific purposes, such as paying for home repairs or property taxes.[2]

The majority of reverse mortgages are FHA insured.


Payment(s) (loan advances)
The amount of money that an individual homeowner can receive from a reverse mortgage depends on their age, the Federal Housing Administration (FHA) or Fannie Mae (FNMA) appraised value of the home, and the starting interest rate (effective upon closing/finalization of the loan). The location of the home may also have an impact. There is also a type of reverse mortgage for homes valued over the maximum Fannie Mae limit. These are called "cash" accounts, and are proprietary loan products.

In a reverse mortgage in the U.S., a borrower can be paid in a lump sum, monthly (payment of advances), through an increasing line of credit, or a combination of all three. The money received (loan advances) are not taxable and do not affect Social Security or Medicare benefits.

An American Bar Association guide explains that if you receive Medicaid, SSI, or other public benefits, loan advances will be counted as "liquid assets" if the money is kept in an account (savings, checking, etc.) past the end of the calendar month in which it is received. The borrower could then lose eligibility for such public programs if their total liquid assets (cash, generally) is then greater than those programs allow.

Costs
The cost of getting a reverse mortgage from a private sector lender exceeds the costs of other types of mortgage loans from such a lender. There is an insurance premium of 2 percent of the loan and a 2 percent origination fee in addition to normal closing cost. Thus a $200,000 loan would have $8,000 in costs beyond the normal closing costs, which are typically some thousands of dollars. In addition, there is a monthly service charge of $30 that is usually added to the total amount of the loan.

The lowest cost reverse mortgages are offered by state and local governments. They generally have low or no loan fees, and the interest rates are typically low or moderate as well. But, as noted above, they often have many restrictions, and many states don't have such programs at all.


When the loan ends
The loan ends when the homeowner dies, sells the house, or moves out of the house for 12 consecutive months or more (for example, to go into an assisted living home). At that point, the reverse mortgage can be paid off by the proceeds of the sale of the house, or refinanced by the heirs of the homeowner's estate. If the proceeds exceed the loan amount, the owner of the house (if moving out or selling) receives the difference; if the owner has died, the heirs receive the difference. For cases where the proceeds are not sufficient to pay off the loan, then the bank (or insurance that the bank has, on the loan) makes up the difference.

The technical term for this cap on debt is "non-recourse limit." It means that the lender does not have legal recourse to anything other than the value of the home when the loan is to be paid off.


Volume of loans
The most popular type of reverse mortgage in the U.S. is the FHA-insured Home Equity Conversion Mortgage (HECM) which accounts for 90% of all reverse mortgages originated in the U.S. As of December 31, 2005 a total of 195,418 HECM loans had been issued since the program's inception in 1989. However, program growth in recent years has been very rapid. The National Reverse Mortgage Lenders Association (NRMLA) reports that 55,659 HECM loans were endorsed thru the first nine months of fiscal year 2006, an 83 percent increase over the 30,404 loans endorsed during the same period in the prior fiscal year.

Section 255 of the National Housing Act, which governs the HECM program, limits the aggregate number of outstanding HECMs to 250,000. Conceivably, the cap could be reached in the next 12-24 months. Efforts are currently underway to remove or expand the cap on the number of HECM loans that can be issued.


Other Options
The biggest drawback with reverse mortgages are the high upfront costs. Some seniors may want to consider other options to tap their home equity, particularly if they do not think they will remain in the home for at least five years.

For example, a home equity line of credit (HELOC) requiring interest-only payments for 10 years can be used. These loans typically have very low (or zero) upfront costs. The drawback is that, unlike a reverse mortgage, the borrower must make a monthly (interest-only) payment to the lender. These payments can be made for several years by drawing on the line of credit itself. Of course, the balance needs to be paid off when the house is sold or the owner dies - just as with a reverse mortgage.

Other options that can free up home equity but avoid the high upfront costs of a reverse mortgage include: 1) intra-family loan or sale-leaseback and, 2) selling and moving to a less expensive dwelling or location. However, when selling the homeowner incurs high closing costs including, typically, a 6% commission, moving costs, and purchase costs on the new dwelling. Currently, there is a coordinated government program called "Aging in Place" that strives to assist the homeowner in staying in their home and neighborhood, if that is their desire. Various studies, including AARP, show that over 80% of elderly homeowners do not want to move.

Answer 2

1

Answer 3

Reverse Mortgages are excellent for the right senior homeowner
Reverse Mortgage Info

There are only a very few requirements for eligibility after the decision has been made to get a reverse mortgage. The borrower must own and live in the home as a primary residence and be 62 years of age or older. In addition, the home itself must be of a type that qualifies for the reverse mortgage program. The vast majority of single family homes qualify, as do most condominiums, townhomes, 2-4 unit owner-occupied dwellings and manufactured homes. Mobile homes and cooperatives typically don’t qualify. Personally, your income and credit levels do NOT matter.


To go through the process of getting a reverse mortgage you will need to speak with a reverse mortgage originator or provider. We can put you in touch with the right one for you by clicking here. This person will guide you through the preliminary steps, including counseling, home appraisals, inspections, and choice of loan specifics. It is very important to feel comfortable with your lender. Feel free to speak with as many people as you need in order to gain information and feel comfortable.

There are a number of options for how to “structure” the money received.


1. Receive a one time lump sum.

2. Receive the money monthly.

3. Receive a credit line that provides flexibility.

4. Use a combination of the above methods.

Once you receive the money, there are virtually no restrictions on the way in which it can be used. You CAN:

Repay existing debt, including the existing mortgage (must)
Make Home Improvements
Finance Regular Living Expenses
Ease Healthcare Costs
Take a Trip to Somewhere You’ve Always Wanted to Go
Give Gifts to Your Family and Friends

It almost seems too good to be true. There are, however, as with everything these days, costs involved. There is an origination fee, closing costs, a servicing fee, mortgage insurance, and interest. These costs come from the proceeds of the loan. You pay very little directly out of your pocket.

You should also know that you cannot lose your home at any time during the life of the loan for failure to make payments. THERE ARE NO PAYMENTS TO MAKE. The loan does not come due until you permanently leave the home or the last borrower dies. The home must be kept up to reasonable standards, it must be insured, and the property taxes must be paid.
http://www.ReverseMortgagePage.com

Answer 4

A loan for home owners who have already paid off their mortgage but want to tap into their home’s equity

Reverse mortgages come in handy for older home owners who might have a financial hardship or who just want some extra cash without having to uproot and sell their homes.

You can either receive a lump-sum loan, a line of credit or a monthly check based on the amount of equity in your home.

This money is also tax-free, since it is a loan. When you sell your home, you use your home’s equity to pay off the loan and interest.
Keep in mind that you need to pay closing costs, such as a loan origination and processing fees.

Typically, to qualify for a reverse mortgage, you need to be over 60.

Answer 5

Reverse mortgages allow a home owner to borrow equity. Instead of making payments to the lender, the lender makes payments to the borrower. Seniors Can Access Equity in Their Homes. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s senior mortgage lending limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

Answer 6

okay there is a downside to this . You must live in the house for the rest of the mortgage years or if you dont they will come after you for the rest of the money. And if you dont pay the money back your relatives get nothing in the house. My grandma had one and she died and they told us that all the belongings in the house belonged to them since she did not pay back the mortgage before she died.Also they sold the house and the belongings and got triple for the house and the furniture than was the amount owed on the mortgage they are crooks plain and simple.

Answer 7

I have NOT tried it. ONLY looked into it.

It is NOT for me !!!! For I want my son to have my home when I die.

If you have no children OR you have children who are financially wealthy already and DO NOT want you to leave them YOUR home. then go for it.

You are simply signing over your home to the lender, they pay you a monthly sum and upon your death, they get the property.

Perhaps you want to travel and that extra money would be nice. If you are OK with letting the lender have your home upon your death then perhaps you would like this type of mortgage. Please think more on this. NEVER sign anything till ALL your questions have been answered. Posting your question here was a good idea. Do not talk to the lender about this...((until you have decided on your own)) for they will simply try to talk you INTO it!

Good Luck!

Answer 8

The maximum amount you can borrow is 66% of your homes value. In your mid sixties the maximum would be 50-55%. Its all based on your age and the interest rate.

Answer 9

Can't think of any shortcommings. Lets someone reduce their monthly expenses a d there doen't seem to be a downside.

Answer 10

does California state or local government have financing available?