2007-02-21 13:35:29 · 5 answers · asked by nitehawk 1 in Business & Finance ➔ Renting & Real Estate
Reverse mortgages are wonderful for older people on a fixed income. It draw from the equity in you home to provide you with extra money. They are only for older folks and the aarp web site has alot of info. You don't lose your home when you pass and you can live more comfortably now. They are great and underrated. If you are young though its not an option for you.
2007-02-21 13:45:03 · answer #1 · answered by melissaw219 3 · 1⤊ 0⤋
no ill intent here, but do you know what a reverse mortgage is? it is not a vehicle to increase cash flow.
it is used primarily by elderly people or those that have a large amout of equity in their homes to supplement their meager social security payments.
let's say that mr and mrs x purchased a house way back when they got married for $30,000. now its market value is $300,000. their original mortgage and any second mortgage or equity loans are paid. therefore, they have $300,000 to borrow against. since they want to remain at home, they won't sell, so they go for the reverse equity mortgage. they are like a lender: they "give" themselves a mortgage in monthly payments to themselves based on their equity. do you think they can leave the house in their will, to their heirs? yes, of course they can, but it may have the lien of the amount of money they took on its equity, which still might leave the heirs a nice chunk of change. or, they may be disappointed. i guess it depends on how long mr and mrs x take money out.
you need to read up on these mortgages, since i do not think you know how they work. how could they increase cash flow on an investment (or don't you mean an investment)?
best to go to the AARP site to read up on them.
2007-02-21 13:51:43 · answer #2 · answered by Louiegirl_Chicago 5 · 0⤊ 1⤋
About Reverse Mortgages
A reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. Below are some common questions asked by consumers about reverse mortgages.
What are My Payment Plan Options?
You can choose to receive the money from a reverse mortgage all at once as a lump sum, fixed monthly payments either for a set term or for as long as you live in the home, as a line of credit, or a combination of these. The most popular option – chosen by more than 60 percent of borrowers – is the line of credit, which allows you to draw on the loan proceeds at any time.
My Understanding is that the Unused Balance in the Line of Credit Option Has a Growth Feature. Does that Mean I'm Earning Interest?
No, you're not earning interest like you do with a savings account. The growth factor is taking into consideration that your home has appreciated in value over the past 12 months and that you are one year older. And just to clarify, the growth feature only applies to the FHA Home Equity Conversion Mortgage program.
How Much Money Will I Get?
No matter which reverse mortgage product you choose, the amount of funds you are eligible to receive will depend on your age (or the age of the youngest spouse in the case of couples), appraised home value, current interest rates, and the lending limit in your area. In general, the older you are and the more valuable your home (and the less you owe on your home), the more money you can get.
Does My Home Qualify?
Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses. In general, co-ops are not allowed. Only the Financial Freedom "Cash Account" program is available on co-ops in New York City.
How Can I Use the Proceeds from a Reverse Mortgage?
The proceeds from a reverse mortgage can be used for anything, whether its to supplement retirement income to cover daily living expenses, repair or modify your home (i.e., widening halls or installing a ramp), pay for health care, retire existing debts, buy a new car or take a "dream" vacation, cover property taxes, and prevent foreclosure.
Are There Any Special Requirements to Get a Reverse Mortgage?
As long as you own a home, are at least 62, and have enough equity in your home, you can get a reverse mortgage. There are no special income or medical requirements.
What If I Have An Existing Mortgage?
You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing mortgage must be paid off. You can pay off the existing mortgage with a reverse mortgage, money from your savings, or assistance from a family member or friend.
For example, let's say you owe $100,000 on an existing mortgage. Based on your age, home value, and interest rates, you qualify for $125,000 under the reverse mortgage program. Under this scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish.
If, however, you only qualify for $85,000, then you would need to come up with $15,000 from your savings to get the reverse mortgage. Even then, all the money from the reverse mortgage will have been used to pay off the existing mortgage. On the other hand, you won't have a monthly mortgage payment.
What Is the Service Fee Set-Aside?
Under most reverse mortgage programs, you will be charged a monthly servicing fee that ranges from $30-$35 to manage your account once the loan closes. The SFSA is an estimate of what the total servicing fees will be over the life of the loan, by multplying your life expectancy (converted from years into months) multiplied by either $30 or $35.
Although it's not considered a closing cost, the SFSA can equal several thousand dollars, which is deducted from your available loan proceeds. You do not have access to that money, nor do you earn interest.
Will I Lose My Government Assistance If I Get a Reverse Mortgage?
A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain would count as an asset and could impact Medicaid eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset. If the total liquid resources (including other bank funds and savings bonds) exceed $2,000 for an individual or $3,000 for a couple, you would be ineligible for Medicaid. To be safe, you should contact the local Area Agency on Aging or a Medicaid expert.
Why Do I Need to Get Counseling?
Counseling is one of the most important consumer protections built into the program. It requires an independent third-party to make sure you understand the program, and review alternative options, before you apply for a reverse mortgage.
You can seek counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), and Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone.
By law, a counselor must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health and financial alternatives; (ii) other home equity conversion options that are or may become available to the prospective borrower, such as property tax deferral programs; (iii) the financial implications of entering into a reverse mortgage; and, (iv) the tax consequences affecting the prospective borrower’s eligibility under state or federal programs and the impact on the estate or his or her heirs.
When Do I Pay Back My Loan?
No monthly payments are due on a reverse mortgage while it is outstanding. The loan is repaid when you cease to occupy your home as a principal residence, whether you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out. The amount owed can never exceed the value of your home. Furthermore, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.
Under What Circumstances Should I Not Consider a Reverse Mortgage?
Because of the upfront costs associated with a reverse mortgage, if you intend to leave your home within 2-3 years, there may be other less expensive options to consider, such as home equity loans, no-interest loans or grants that may be offered by your county government or a local non-profit to repair your home, or a tax deferral program, if you're having problems paying your property taxes
www.hud.gov
http://www.reversemortgage.org
http://www.aarp.org/money/revmort/
http://www.reverse.org/
http://www.ftc.gov/bcp/conline/pubs/homes/rms.htm
Reverse Mortgage Education Project
AARP Foundation
601 E Street, NW
Washington, DC 20049
1-800-209-8085
www.aarp.org/revmort/list
U. S. Department of Housing and Urban Development (HUD)
451 7th Street, SW
Washington, DC 20410
1-888-466-3487
www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
ftc.gov/credit — Click on “Mortgages & Your Home” 1-877-FTC-HELP (1-877-382-4357)
2007-02-21 15:41:10 · answer #3 · answered by W. E 5 · 0⤊ 0⤋
Only if you are old and preparing to die. Other wise you will have to pay for that loan sometime. Remember, loan companies NEVER lose money!
http://www.predatormarketingsystem.com/bigbucks/
2007-02-21 13:44:14 · answer #4 · answered by The Money Alchemist 1 · 0⤊ 2⤋
Depends on your situation. try here
2007-02-21 13:45:31 · answer #5 · answered by firstlibertymortgagecompany 1 · 0⤊ 1⤋