Reverse Mortgages Come To The Rescue for Senior Homeowners

Posted on February 28, 2010 by Beth Paterson, CRMP

Are you looking for some funds to supplement your retirement? Do you need to modify your home to meet your needs? Are you looking for a way to pay for the home health care you need? Do you have a mortgage and find making the payments is a struggle? Or maybe you want to continue making your trip south during the winter but funds are short to do so.

A reverse mortgage may be your answer. A reverse mortgage is a home equity loan with special terms for senior homeowners 62 and older. Similar to a conventional loan, you own the home and are responsible for taxes, insurance, and the maintenance. The difference, and the benefit to seniors, is there is no income or credit score qualifications and no monthly payments required. It also offers more flexibility on how you can receive the funds including monthly payments, line of credit, lump sum or a combination of these versus a lump sum with a conventional mortgage.

An additional benefit is funds left in the line of credit grow so more funds become available over time. The loan becomes due and payable when the home is no longer the primary residence of the borrowers or on their 150^thbirthday. Another difference and benefit of the reverse mortgage is that the reverse mortgages are non-recourse loans. This means there is no personal liability if the loan balance is higher than what the home can be sold for and the borrower or their estate are not maintaining ownership.

There are no limitations on how you spend the funds. Look at how the reverse mortgage benefited some seniors:

Eliminate Mortgage Payments, Home Upgrades and Line of Credit: Dee and Peter did a reverse mortgage to eliminate their current mortgage payment, take a lump sum for some home upgrades, receive an extra $300 a month in monthly payments to supplement their Social Security, and still have funds in a line of credit for future use.
Maintain Lifestyle: Helen and Harold did a Reverse Mortgage to afford to take their annual trip to Florida during the winter months. They are thankful they are able to maintain their lifestyle.
Not Rely on Children: Nancy had accrued some debt including some credit cards and borrowing from her children. She did a Reverse Mortgage to pay off those debts and to have a line of credit available for future needs. She also enjoyed having some extra cash to purchase some things to fix up her home and to go to lunch with friends on occasion. Because her children had their own expenses and needs, they were relieved that their mother had done the Reverse Mortgage and could live more comfortably without relying on them.
Protect Other Investments: To have extra spending money without having to cash out their CDs or other investments, Jerry and Carol decided to do a Reverse Mortgage. Providing them more freedom and control of their life during retirement.
Purchase a New Home: Marilyn wanted to purchase a new home so she used the Reverse Mortgage rather than a conventional mortgage to finance her new home. This meant she didn’t have mortgage payments to make and provides her a better cash flow during her retirement years.
For more ideas on how seniors used their reverse mortgage funds visit “Meet Our Borrowers” and “Uses of Proceeds” on our Reverse Mortgages SIDAC website.

As with any mortgage loan there are closing costs. The costs of the reverse mortgage are comparable to a conventional mortgage. They include the origination fee, appraisal, title settlement and recording fees. With the FHA HECM (Home Equity Conversion Mortgage) reverse mortgage HUD regulates the fees and requires that only the actual cost may be charged to the borrower, they do not allow mark ups such as processing fees. As a FHA loan the fees include the FHA Mortgage Insurance Premium – this would be the same if they are doing a conventional FHA loan. When comparing costs side by side to a conventional loan the difference is the up-front FHA Mortgage Insurance Premium. The benefits of FHA insuring the loan include guaranteed funds, a lower interest and the loan being non-recourse as well as regulating the fees. “Reverse Mortgage Closing Costs – High or Mythical” provides a side-by-side comparison.

When considering whether to do a conventional mortgage or a reverse mortgage you must consider if you can even qualify for a conventional mortgage; then if you can make the payments over time. For example, what happens if “life happens,” could you continue making those payments? Would you be stressed trying to pay living expenses, medical bills, or would you be facing foreclosure? These articles can assist you in reviewing what to do: “A Reverse Mortgage Or A Conventional Mortgage? That Is The Question.“or “Is Waiting To Do A Reverse Mortgage The Best Decision?”

When you decide to do a reverse mortgage make sure you work with an originator or loan officer who is FHA licensed, specializes in Reverse Mortgages, has years of experience and knowledge in reverse mortgages in your state, meets the state licensing requirements (for example in MN mortgage brokers need to be individually licensed – even if they are calling you from another state), and are willing to meet with you to review the details, before the application, during the application and at closing. I would caution about working with a lender from another state who is mailing all the documentation, including the application and not “meeting” with you to explain and review what you are signing. Ask for references and find out if they will be there for you even after the loan has closed. If you feel pressured, call another lender. You can find a list of questions to ask an originator at our webite: www.RMSIDAC.com, “Why Choose SIDAC,” “What To Consider When Talking To Lenders.” Or my blog article, “Don’t Let Fear Keep You From a Reverse Mortgage But Know What To Look For In A Lender.”

To ensure that borrowers understand reverse mortgages HUD requires anyone doing a reverse mortgage to complete counseling through a third-party. They will review the program and discuss other options that may be available.

Will the reverse mortgage be the answer to your financial retirement needs? Explore the option, get the facts, know what to look for in a lender, you might find it will benefit you as it has benefited hundreds of thousands of other seniors.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-gG

Additional related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

The Impact Of A Reverse Mortgage On A Community Spouse

Posted on February 20, 2010 by Beth Paterson, CRMP

I want to provide the facts on a comment I received regarding a reverse mortgage for a couple where one is considered a community spouse, i.e. one living in the community and the other is not and receiving Medicaid assistance. This person stated that if a reverse mortgage was put in place for a couple to provide the money for the expenses where one needs more in home care than the spouse can give, then after the ill person passes away, the remaining “community spouse” would have no or little money AND no place to live.

In reality, the reverse mortgage is a great tool for keeping seniors in their homes and paying for home care whether a single person or as a couple. An additional benefit for them is the reverse mortgage is not considered income so the borrowers may still receive public benefits such as Medicaid or other county benefits in addition to the reverse mortgage. They can also receive VA benefits if they qualify. Depending on the circumstances, Medicaid could cover the home care costs, the reverse mortgage could be used for things not covered by Medicaid and for the needs of the community spouse, i.e. maintaining the home, paying taxes, insurance, auto expenses, groceries, etc.

With both names on title, when the ill person passes away the community spouse would still have a place to live as they can stay in the home because the loan is not due and payable until the home is no longer their primary residence or on the 150th birthday of the youngest borrower. This means they can still have a roof over their head without having to make monthly mortgage or rent payments.

In fact the reverse mortgage can provide funds for more care than selling and moving into senior housing. When one sells, the net proceeds would be used to pay rent in senior housing as well as for home care whereas when staying in ones’ home the expense is lower, there is no rent payment and they would have a roof over their head. One of my Blog articles, “Be Educated About Your Options of Care And Financing The Care,” compares the differences of costs of selling and moving to staying in the home with a reverse mortgage and receiving home care.

Let me share the story of my clients, Bob and Jean. Jean had some memory loss issues so she was in a memory care Assisted Living facility. At the recommendation of their Elder Law Attorney Bob decided to do the reverse mortgage to pay for Jean’s rent and care. Jean was living in a private pay facility so the reverse mortgage allowed her to remain in the same place and not have her rely on government funding. The reverse mortgage provided them the control and choice of where Jean would live. The reverse mortgage also freed up some cash flow for Bob as the community spouse since Jean’s care was no longer coming from his Social Security or pension.

Reverse Mortgage Benefits MN Community Spouse

When Jean passed away the reverse mortgage funds were no longer needed for her care so there was more funds were available for Bob’s use. When Bob needed some additional care assistance of his own the reverse mortgage funds were used for his home care needs. Bob was able to have funds and live in his home until his death several years after the reverse mortgage was originated. This couple received what everyone of us desires: their desired security (having a place to live), independence (not relying on others), dignity (they could make their own decisions), and control (deciding where they were to live).

Experienced reverse mortgage originators along with a team of an Elder Law Attorney, care manager, and home care agency who is familiar with reverse mortgages can to help determine what is right for a senior’s situation especially when they may need home care or the decision of when one may need a care center.

The reverse mortgage can be a lifesaver for seniors even as a community spouse. Through the years I’ve been fortunate to help many seniors in these circumstances providing them with security, independence, dignity, and control.

Review these additional articles for facts and how reverse mortgages have benefited seniors:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

The Misconceptions of Reverse Mortgages Abound… What Do You Know?

Posted on February 14, 2010 by Beth Paterson, CRMP

MN Reverse Mortgage Borrowers Learned The Facts

As those of us who specialize in reverse mortgages know, there are more misconceptions about reverse mortgages than knowledge of the facts. Let me clarify the facts for you. First, a reverse mortgage is a mortgage just like any other mortgage but has special terms for seniors 62 and older.

Like any other mortgage the borrower owns the home, keeps the title, is responsible for paying the taxes, insurance and maintaining the home as well as abiding by the terms of the loan. The initial difference between conventional mortgages and reverse mortgages is in the qualifying, with the fact that there are no income or credit score qualifications and no monthly payments required.

Closing costs are comparable to conventional loans – the difference is the FHA mortgage insurance. See a side-by-side comparison at my blog post, “Reverse Mortgage Closing Costs – High or Mythical?”

Income, assets, credit and risk is used to determine the interest rate on a conventional mortgage. When you’re a senior on a fixed income the interest will be higher. Whereas with the reverse mortgage the interest rate is historically lower than conventional mortgages. While the interest rate will vary from the program chosen and the time of closing, the interest rate is the same for all seniors – it doesn’t matter if you are receiving only Social Security or also receiving pension and/or still working and earning an income and don’t have any additional assets. Currently the interest rate is under 3.5% for the adjustable rate and 5.56% for the fixed rate.

Reverse mortgage loan balance increases over time because borrowers are not making payments. Often criticized because the loan balance will be higher in the end, you need to keep in mind that borrowers have access to these funds without making payments. Yes, the interest, servicing fee and FHA Mortgage Insurance Premiums are being added over time but have you added together what you have paid in interest payments? You’ll find that if you weren’t making payments they too would look high. Essentially the borrower is also borrowing these fees each month.

The amount loaned from the reverse mortgage is based on the home value, Expected Interest Rate (used only for this purpose – not the interest accruing on the loan) and the age of the youngest borrower. The older one is the more they can access. This is determined by a formula set by HUD and the margin generally set by Fannie Mae or Ginne Mae.

An advantage of the reverse mortgage for seniors is they can use the equity in their home for their needs or wants, whatever those may be up to the maximum allowed by the loan. Seniors often take advantage of this fact and the reverse mortgage helps them stay in their home as long as they desire or until their death. To read about how some have used their reverse mortgage proceeds click here.

Reverse mortgage funds can be received in a lump sum, monthly payments, line of credit or a combination of these. Unlike any other line of credit, the funds left in the line of credit grow so more funds become available in the future. Monthly payments can be structured as tenure (for life) or in a monthly amount desired. In essence, over time the senior can be borrowing more than the home value that was determined at the time of closing.

The reverse mortgage loan becomes due and payable when the home is no longer the primary residence of the borrower(s) or on their 150^th birthday. As with a conventional loan the borrowers can decide to stay in their home or to sell when they desire.

The borrower or the estate communicating with the servicing company is crucial when the home is no longer the primary residence of the borrower. HUD insures most reverse mortgage loans so their terms must be followed by the borrowers and the servicing companies.

Once the loan is closed funds are guaranteed to be available for the borrowers based on the home value at the time of closing. The lender cannot decide to lower how much one can access in the future or call the loan due and payable as long as the terms of the loan are being abided by.

Yes, in a down market the home values have dropped. The advantage of the reverse mortgage for the seniors who took one out when the market had higher home values is the seniors could access more funds that were/are guaranteed to be there for them.

As a non-recourse loan, the reverse mortgage is repaid only from the property when it is sold, there is no personal liability to the borrower or their estate as long as they are not retaining ownership. A huge advantage for seniors – they do not leave a debt to their heirs.

With a conventional mortgage the borrower or their estate could still be responsible for paying back the full value of the loan whereas with the reverse mortgage the lender is only paid back from the sale the home as long as the borrower or their heirs are not retaining ownership.

And another important factor is if the loan balance is less than what the home can be sold for the borrower or the heirs keep the difference.

Satisfied MN Reverse Mortgage Borrowers Who Reviewed Documents

It is a requirement that when doing a reverse mortgage sample closing documents are to be left (or provided within 3 days) at the time application. This gives the borrowers time to review the terms, have them reviewed with their family, advisors or an attorney. Having the time to review these during the processing of the loan provides an opportunity to get the facts and terms of the reverse mortgage. Reviewing these should help dispel the many misconceptions there are about reverse mortgages.

Once understood, seniors find the reverse mortgage very favorable. As one of my clients, Jim, wrote: “The Reverse Mortgage enables us to live in our home without mortgage payments. Line of credit will grow for our future needs. The whole package is a win-win for my wife and me.”

Review these articles for another look at the facts:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

They’ll Say Anything To Get A Reverse Mortgage Application

Posted on February 6, 2010 by Beth Paterson, CRMP

Marie lives in a manufactured home (sometimes called a mobile home). It’s a beautiful home built around the original form so you can’t even tell it’s a manufactured home. Two years ago I worked with Marie but unfortunately we were not able to do a reverse mortgage because her manufactured home did not meet HUD’s requirements. While we can do a reverse mortgage on manufactured homes they have to meet the long list of HUD’s requirements.

Two weeks ago Marie called and said she had talked with an originator of a large bank who told her that the reverse mortgage can be done on her home. Marie said she had called me because she trusted me. As I discussed the situation with her she said the other originator had told her that they found on the internet that her property had been reclassified. Additionally Marie said at the suggestion of the other originator she had scheduled her required counseling.

Not believing that a manufactured home could be reclassified, I told Marie to cancel the counseling (potential cost of $125 which she didn’t need to spend if her property wouldn’t qualify) and that I would check to see what I could find out for her regarding a reclassification.

After doing some checking on the internet, reviewing HUD’s requirements and checking with an underwriter, I called Marie back to confirm what I initially thought, her property was not reclassified from HUD’s standpoint and HUD would not insure her property. A manufactured home is a manufactured home no matter how much you have done to change the look.

Fortunately Marie had called me – if she had proceeded with the other lender she would have spent $125 for counseling, $450 to $500 for an appraisal and then found out that she still couldn’t do the reverse mortgage. She took it in good humor, stating, “They’ll do anything to get an application.” While I would have loved to do the reverse mortgage for her, I believe in servicing the client even if it means I won’t earn a commission.

Another call I received was from someone who was shopping for lenders. They lived on a rural property and after talking with them about their property I determined that it would not meet HUD’s requirements because of commercial use. This person said they were told by a large bank originator that they could do the reverse mortgage. If they proceed in with the counseling, application and the process with the other lender when the file gets to underwriting (hopefully) or to HUD they will be very disappointed when they learn the reverse mortgage can’t be done, especially when they have paid for the counseling and appraisal, credit and flood certificate fees.

Reverse Mortgages can be lifesavers for seniors but the property has to qualify. Keep in mind that some lenders require originators submit a number of applications as part of their employment, even if they don’t close. These are just a couple of examples, we receive other calls on unusual properties where other originators have led the borrower to believe a reverse mortgage can be done where in fact HUD will not insure the property. While this is not reverse mortgage fraud, I consider it to be unethical.

Seniors should contact and work with originators who have years of reverse mortgage experience not only in originating but also with HUD’s as well as the investor’s requirements, processing, underwriting. Ask for references. Additionally the originator should look out for the seniors, i.e. be a senior advocate – we don’t want to get senior’s hopes up and have them pay out hard earned money if they aren’t going to qualify for a reverse mortgage.

Don’t be afraid to ask the originator questions about their knowledge and experience with the various aspects of reverse mortgages, from origination, processing, underwriting, closing, servicing, etc. Utilize the questions in my Blog article “Don’t Let Fear Keep You From A Reverse Mortgages But Know What To Look For In a Lender.” Additional information can be found on our website: “What To Consider When Talking With Reveres Mortgage Lenders” and “Why Choose Prestige Mortgage, LLC/Reverse Mortgage SIDAC.”

Also read how reverse mortgages have made a difference in the lives of those who do qualify:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Minnesota Reverse Mortgages SIDAC

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Monthly Archives: February 2010

Reverse Mortgages Come To The Rescue for Senior Homeowners

The Impact Of A Reverse Mortgage On A Community Spouse

The Misconceptions of Reverse Mortgages Abound… What Do You Know?

They’ll Say Anything To Get A Reverse Mortgage Application