A Reverse Mortgage Should Be A Last Resort… To What?

Posted on June 7, 2011 by Beth Paterson, CRMP

So called senior advocates often state a reverse mortgage should be a last resort. My question is to what?

A Home Equity Loan? To qualify for a home equity loan or a traditional loan a lender looks at a borrowers’ credit, income, assets, and ability to make payments. Most seniors don’t qualify for a home equity loan.

Even if a senior does qualify now, if “life happens” and they have to juggle making a mortgage payment or having funds for other expenses, their stress level increases. And if they don’t make their mortgage payments they could be facing foreclosure.

I receive calls on a regular basis from seniors who did a home equity loan or traditional loan just a few years ago and now they can’t afford the payments. When I run the calculations more times than not I find there are not enough proceeds from the reverse mortgage to pay off their current mortgage, a requirement of the reverse mortgage, mainly due to lower home values. But could also be due to the reverse mortgage qualifying factors:

the amount one qualifies for with a reverse mortgage is determined by the age of the youngest borrower (the older one is the more one will receive)
the home value (determined by a FHA appraisal)
the Expected Interest Rate of the program chosen (the higher the interest rate above the 5% FHA floor, the less funds are available)

A combination of these factors could mean there are not enough funds to pay off a current mortgage at a later date. For example, even though one is older in three or four years, the interest rate could be higher and the home value lower meaning less funds available.

The reverse mortgage as a “last resort” to a home equity loan or traditional mortgage is not generally a wise decision – one could have larger issues in the future.

A last resort to selling and moving? The time it takes to sell the lower home values, the real estate costs and moving costs can be prohibitive for selling and moving to be a better option to a reverse mortgage. In addition most seniors want to stay in their home. See comparisons of costs in my article, “I Want To Stay in My Home – Don’t Tell Me To Sell!” and “Be Educated About Your Options Of Care And Financing The Care.”

A Loan from a family member or friend? Or help from a family member? Is there someone who can and is willing to help financially? What happens if “life happens” to them, i.e they lose their job or have health problems? This could negatively impact finances for everyone, cause stress for everyone and impact relationships. Again, generally not a better option to a reverse mortgage.

Skimping on necessities? “Getting by” without a reverse mortgage? Doing without to preserve equity for what may be future needs or to leave an inheritance for heirs? Living from Social Security check to Social Security check just to get by and maybe doing without some of the things in life that give us dignity such as having lunch with friends, getting one’s hair done, or having cable TV… is this really a good option over a reverse mortgage? Why should one be warned off a reverse mortgage rather than living life comfortably? Or as Ed, a reverse mortgage borrower stated, “the reverse mortgage gives us some elbow room.”

Not having debt but waiting, saving the equity? Why attempt to preserve equity from one’s home for the future or as an inheritance for heirs? For what? Why shouldn’t one enjoy the extra luxuries in life such as buying a car, taking a dream vacation having funds to attend a family reunion or wedding? A reverse mortgage could help one remain independent, protect other assets, have security knowing one has funds for what one needs or wants as well as have control and choices of one’s lifestyle.

As a senior advocate myself, I help seniors review all their options and educate them on the reverse mortgage so they can make an informed decision and the choice of what best fits their needs.

A true senior advocate will stop stating a reverse mortgage should be a last resort and see that in the big picture the reverse mortgage is generally the best solution sooner than later. At least it should be reviewed as a valid option for seniors. And then let the senior make their own personal decision.

My question remains, a reverse mortgage should be a last resort to what? Mary and Larry, who did a reverse mortgage, stated, “A last resort? When one is retired it is the last resort. Our reverse mortgage has been wonderful to meet our needs and maintain our lifestyle.”

This material my be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-r6

Are You Confused on Whether to Use A Reverse Mortgage Broker, Bank Or Lender?

Posted on May 7, 2011 by Beth Paterson, CRMP

I’m sure you have heard the terms “Mortgage Broker,” “Bank” and “Lender,” but do you know the difference? Do you know for which your loan officer or originator works? Do you know how to check on their background? I’m writing this article to clear up the confusion so you learn the difference and the advantages of working with a Reverse Mortgage Broker.

A mortgage broker is a company in the mortgage business who works with various lenders but does not loan the money. Sometimes referred to as an originating lender.

A Bank or Federal Insured Depositary Institution will often have mortgage loan officers who are employed by the bank and offer only the banks mortgage products, giving borrowers limited choices. A bank may choose to be FHA approved and offer the HUD insured reverse mortgage, the Home Equity Conversion Mortgage, often called a HECM.

A lender is a company who lends money, but is not necessarily a bank. They too often employ loan officers who only offer their mortgage products (called their retail department) which has limited choices for borrowers. Lenders may also choose to be FHA licensed and offer the HECM.

Banks and lenders may have a wholesale department where their reverse mortgage products are offered through approved mortgage brokers. Not all mortgage brokers can offer reverse mortgages. To offer reverse mortgages the loan officer’s company must be approved by an FHA approved lender. Lenders will only approve mortgage brokers who meet certain criteria.

Let’s look at why working with a reverse mortgage broker instead of a bank or lender’s retail loan officer has it’s advantages.

Mortgage brokers often work with more than one lender which allows the borrowers to have more options available to be in their best interest and work with the lender/servicing company with the best customer service.
As of January 1, 2011 all mortgage brokers (reverse or traditional) are required to be licensed both at the Federal and State levels. This is managed through the National Mortgage Licensing System or NMLS.

To meet the Federal Licensing requirements we needed to take 20 hours of education, pass a test (a very challenging one, I might add), pass Federal background checks, have our credit reports checked and be finger printed.

Each state has their own licensing requirements. Minnesota required 20 hours of education and 8 hours continuing education each year.

Lending practices and standards, ethics, and Real Estate Settlement Procedures Act (RESPA) regulations were covered in the education and on the test.

The test focused on conventional lending products so those of us who only offer reverse mortgages had additional challenges to pass the tests.

FDIC Bank and NCUA Credit Union originators do not have the licensing requirements so they have not received the education, passed the tests or gone through the same background checks. At some point the bank and credit union originators will be required to be registered . This will still not be the same as meeting the licensing requirements.

Mortgage Brokers who provide you any information about your loan including various loan options and interest rates must be licensed.

Mortgage Brokers are required to have their company and individual NMLS numbers on all marketing materials. In Minnesota the company NMLS number is identified as “MO” or Mortgage Originator. The individual is identified with their “MLO” or Mortgage Loan Originator number. If you don’t see these numbers on business cards and marketing materials including brochures, flyers, blogs, email signatures, presentations, etc. they are either not licensed or out of compliance.

You can check out your originator on the NMLS website at http://www.nmlsconsumeraccess.org/ This will provide you with a lot of valuable information on who you are working with to originate your loan including:

If they are licensed (if not listed or don’t have a license number, they are not licensed to originate loans)

If they are authorized to conduct business. And which company they are authorized to represent.

If they are licensed in your state. (You want to make sure the person you are talking with and that signs your application is licensed in your state. Don’t work with a person over the phone that is not licensed in your state. I have heard stories where borrowers talk with one person on the phone but another one signs the application because the call center person is not licensed in the state. This is against the law.)

The company where they currently work. (Does it match the information they have given you?)

Where they worked in the past.

Their company and branch license information.

Banks and lender’s retail departments often have a phone/call center representative. Conversations and applications are often done over the phone and through the mail verses reverse mortgage brokers who often take time to meet with borrowers face-to-face in their own homes. This means one may receive more personal service from a reverse mortgage broker.
Large bank institutions often have their eye on the bottom line by departmentalizing activities which forces loan officers to focus on just taking applications and not understanding all aspects of the reverse mortgage including the processing and servicing. My blog post, “They’ll Say Anything To Get An Application” points out a couple of these situations.

I am proud to be a mortgage broker, MO #173899, to have passed my licensing requirements, MLO #342859, offer options that can be best for my borrowers as well as personal service. I have pride in having 100% customer satisfaction documented with our customer survey.

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-qB

Seventeen Facts About Reverse Mortgages You May Not Know.

Posted on April 30, 2011 by Beth Paterson, CRMP

With the many misunderstandings about reverse mortgages I want to share seventeen facts to help clear up the misconceptions.

A reverse mortgage is a mortgage just like any loan against the home where the borrower is using the equity of their home to meet their needs and desires now, but with special terms for seniors 62 and older.
The lender or bank does NOT own the home – YOU OWN THE HOME, you keep the title! The lender or bank does NOT take your home when you die.
Income and credit scores do not determine the interest rate. Interest rate is determined by the margin and the program chosen.
No monthly mortgage payments are required. Borrowers are responsible for paying property taxes, hazard insurance, maintaining the property, paying HOA dues if applicable.
The home does not have to be free and clear or have a lot of equity. Although enough equity is needed to pay off current liens and/or mortgages.
There is no limitation on how the funds can be used. Some common uses include paying off a current mortgage, paying for home repairs or modifications, planning for retirement and long term care, home health care or adult day services, medical expenses, every day living expenses and even to purchase a home. Whatever one needs or wants.
More options are available than with a conventional or home equity mortgage – Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
Social Security and Medicare are not affected because it is a loan, and not considered income.
Medicaid (Medical Assistance [MA] in Minnesota) can still be received with the reverse mortgage. (Your originator should know this and be able to assist you if or when you are going on Medicaid.)
Borrowers can stay in the home as long as it is their primary residence, or in the case of a couple, as long as one borrower is still in the home as their primary residence, and they are abiding by the terms of the loan. The due date on the mortgage is the youngest borrower’s 150th birthday. Eligible non-borrowing spouses may be eligible for a Deferral Period.
At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference. The bank does NOT keep the difference!
The loan is non-recourse which means there is no personal liability to the borrower or their heirs. This means borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is sold (at fair market value). Borrowers are not leaving a debt to their children.
Just like any mortgage, borrowers are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
As borrowers use the funds/equity and are not making monthly payments the loan balance increases meaning because they used the money now, there will be less available when the loan is being repaid. (With a conventional mortgage one is using the equity but making monthly payments which repays the interest and a portion of the principal each month.) With the reverse mortgage, one has the flexibility to choose to make payments to reduce the loan balance, funds then become available to re-borrower in the future.
Closing costs are comparable to a conventional mortgage – even though many times they are considered expensive or high they compare to conventional loans, in fact the difference comes down to the FHA Mortgage Insurance Premium. Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees. You can see a comparison of the costs in my article, “Surprise! Reverse Mortgage Closing Costs Actually Compare to Conventional Mortgage Costs” Note, there are no out of pocket costs except for the appraisal, possibly engineering inspections and counseling. The costs typically become part of the loan balance.
FHA offers and insures through HUD the majority of reverse mortgages known as the Home Equity Conversion Mortgage or HECM, making it the most highly regulated mortgage available.
HUD insuring the reverse mortgage provides advantages including:

Guaranteeing the funds are available for you.

Guaranteeing the lender against default or shortfalls

Keeping the interest rates lower, the interest rates have historically been lower compared to other mortgages.

Providing a line of credit growth rate (available only with reverse mortgages).

Ensuring as a reverse mortgage it is a non-recourse (no personal liability) loan.

Requiring counseling by a third party HUD trained and approved counselor.

The HECMs are highly protected. See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.”

Before dismissing a reverse mortgage as an option, know the facts and talk with a reverse mortgage expert to see if one is right for your situation. Originators do not charge to meet with you and educate you on reverse mortgages. No product or service is right for everyone but with the facts you can make an informed decision.

Originally posted in 2011, updated in 2015.

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.

Reverse Mortgages Give Reasons For Hope

Posted on April 22, 2011 by Beth Paterson, CRMP

As I was reflecting on the hope that this season brings I got to thinking about the reasons the reverse mortgage gives hope to seniors. Here are some of the reasons for hope with a reverse mortgage. Yes, the list is long but seniors have a long list of wants and needs for hope. With a reverse mortgage one will be able to:

Stay in one’s home where they may have raised their family, are familiar with the neighborhood and their neighbors and where they usually want to remain.
Pay off a current mortgage to eliminate the monthly mortgage payments.
Save one’s home when faced with foreclosure or tax forfeiture.
Have improved cash flow with no monthly mortgage payments.
Have funds for making home improvements or home modifications.
Retire and not feeling like you have to work just to have money to pay the bills.
Have cash flow to be able to pay taxes.
Have funds to pay for home health care.
Have funds for some assistance with home care or companion services.
Have funds for adult day services.
Have funds for medical expenses and prescriptions.
Afford going to the dentist.
Afford new eye glasses.
Have funds for the needed hearing aid.
Have funds to cover long term care expenses.
Cover everyday living expenses.
Not rely on credit cards.
Not rely on children.
Have funds for the little extras in life, like:
- getting one’s hair done,
- having cable TV,
- buying groceries,
- going to lunch with friends,
- treating their children to dinner,
- going to community plays or the theater or a concert,
- taking the grandchildren to the zoo or a movie,
- Depends (I had a client say with their reverse mortgage they could now afford to by Depends),
- being able to do hobbies.

Purchase a more dependable car
Afford transportation if one can no longer drive.
Afford the travel for the family wedding or reunion.
Take the vacation they have dreamed of all their life.
Protect some of their other retirement funds or investments where there might be taxes or penalties on withdrawals.
Purchase a new home to downsize and/or move closer to family
Have funds for emergencies.
Reduce financial stress.
Have funds to full fill needs and goals.
To live with security, independence, dignity and control.

I have helped seniors where a reverse mortgage has fulfilled all of these reasons and more, providing hope for their future (visit the links below for some stories). A reverse mortgage has given hope to thousands of Minnesota seniors so they can remain in their home with security, independence, dignity and control even during trying times. If you know a senior who is looking for hope for one of the above reasons, a reverse mortgage may be their answer.

To determine if a reverse mortgage is right for one’s situation, talk with an experienced licensed reverse mortgage expert to get the facts. Learn some of the facts at our website: www.RMSIDAC.com. “What to Consider When Talking With Reverse Mortgage Lenders” will help you determine questions to ask when choosing your originator.

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/pxPEm-pQ

Related articles of stories on how seniors have used the reverse mortgage and how it’s made a difference in their lives:

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.

I’m In The Reverse Mortgage Industry Because…

Posted on April 16, 2011 by Beth Paterson, CRMP

We received a call the other day from the daughter of a reverse mortgage client who we had closed several years ago. Her mother, Mildred, had been in foreclosure, in fact in this situation the sheriff’s sale had already happened.

Because credit scores and income are not required to qualify for a reverse mortgage and there were enough funds to pay off the mortgage, Mildred qualified for the reverse mortgage and we were able to save her home from foreclosure and redeem it from the sheriff’s sale. With no monthly mortgage payments the reverse mortgage has allowed Mildred to live in her home with improved cash flow.

As she has done through the years, Mildred’s daughter was calling just to say, “hello.” During the calls she always let us know how her mother is doing and what’s happening in her life as well. She reported that her mother is happy that she is still able to be living in her home. She’s doing well and now goes to adult day services to provide her some socialization.

It’s a pleasure to get these calls and hear how our clients are doing. I’m in the reverse mortgage industry because I am able to make a difference in one’s life so they can remain in their home as they so choose. It’s an honor to have our clients and their family members call to just say “hello” and let us know how they are doing. Even years after the closing it’s rewarding to hear we have made a difference in their life. I’m blessed to be in the reverse mortgage industry and help our Minnesota seniors and their families.

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-pF

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.

Reverse Mortgage Allowed Creation of Memories for Family

Posted on March 5, 2011 by Beth Paterson, CRMP

Friday I received a call from the niece of one of my Minnesota reverse mortgage clients telling me that Bob had passed away. After extending my sympathies I answered her questions and helped her understand the process now that the loan is due. As I talked with Bob’s niece she shared how loving Bob was and how the FHA Home Equity Conversion Mortgage (HECM) reverse mortgage not only benefited him but also allowed for him to create numerous memories for the family.

During our conversation I shared some memories of my meetings and conversations with Bob and his perspective on how the reverse mortgage had made a difference in his life. Bob had called me after his trip to Yellowstone with a nephew telling me what a wonderful time he had had and how happy he was to be able to take the trip. During another conversation he had said he had remodeled his home to be adapted to be wheelchair accessible. He had also shared how much the reverse mortgage had given him his independence and the ability to remain in his home where he wanted to be with his dog. I originally shared Bob’s stories in my blog “Reverse Mortgage Helps Minnesota Senior To Be Prepared for Future.”

Apparently Bob’s wife who had proceeded him in death limited Bob from fulfilling his dreams. It appeared it had to do with not having much money but also her attitude. With the reverse mortgage he had money like he never had before. He would tell his niece, “I don’t know how it is that I have money now when I never did before.” She said he became energetic and interested in life.

The family’s perspective of the trip to Yellowstone was that it had not only been a wonderful experience for Bob, his young traveling partner had an experience of a lifetime with his uncle and has memories of the trip to treasure. I was told the expressions on their faces upon their return were smug and they were keeping secrets that will likely never be shared like “little boys” do.

Bob bought gifts for family members like a vacuum cleaner for someone who needed it but didn’t have the funds to purchase it on their own. What a good feeling it must have been for Bob to be able to help his family.

He bought tickets to take family members to movies and plays. I was told that one of those experiences was taking his niece’s family to the play “Sleeping Beauty.” As they were sitting in their seats the niece looked over and saw the pleasure in Bob’s face as he was watching the expressions on the faces of his family. What a memory to treasure! This was only one of several of these types of adventures and memories for Bob and his family. The pleasure for the family was the kids got to know an uncle and share time with him as they had not been able to previously.

Having less funds available when the loan is due and payable or less of an inheritance is a negative of the reverse mortgage. But using the funds and creating the memories by spending time together or giving the gifts and seeing the difference it makes while one is still alive can be a treasure which can never be replaced.

As his niece shared the stories I got tears in my eyes. The reverse mortgage had not only changed Bob’s life but the lives of an entire family. Just before we were hanging up, Bob’s niece said, “Thanks for loving my uncle too.”

Providing security, independence, dignity and control for our seniors is why I believe in reverse mortgages and am in this industry. It’s a blessing for me to be able to help -2015seniors and their families. And I do love my clients and hearing their stories.

For the details and facts on reverse mortgages visit our website, www.RMSIDAC.com.

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.

How Do We Determine If A Reverse Mortgage Is Not Right For Us?

Posted on February 19, 2011 by Beth Paterson, CRMP

“Do you have any info on how to tell if a reverse mortgage is not right for you?” is a question I recently received from Stan Cohen of www.MaturityMatters.net. He stated that one of the big issues he hears about is that seniors are afraid that a reverse mortgage may not be right for them. He also stated that he has heard seniors are afraid of outliving their money and being forced from their homes. Additionally he expressed the concerns of being hospital/nursing home bound for over a year and negating their contracts.

Following is my reply to help seniors and their families have a better understanding and overcome their fears of reverse mortgages.

There are a lot of misconceptions about reverse mortgages and I believe this puts the fear into the seniors and their families.

A reverse mortgage is a mortgage just like any mortgage but with special terms for seniors 62 and older. With a reverse mortgage there are no income or credit score qualifications and no monthly mortgage payments. Another difference from a conventional mortgage is the reverse mortgage loan is not due and payable until the home is no longer the primary residence of the borrower or on their 150th birthday.

One can go into the nursing home temporarily as long as the home remains their primary residence and they are returning to the home within a year.

Once a reverse mortgage is in place, even if they use all their funds from the reverse mortgage the borrowers can stay in their home. The advantage is they don’t have mortgage payments to make which takes away the risk of foreclosure from not making a monthly mortgage payment.

Just like a conventional mortgage, borrowers are responsible for keeping insurance on the property, paying property taxes and maintaining the home. As long as they abide by the terms of the loan they are not forced from their home.

Some of my blog posts may help you clarify the facts:

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

“Beware of Reverse Mortgage Misconceptions – The Fact is Reverse Mortgage Lenders Do NOT Own The Home!”

“Why Are You So Afraid of Reverse Mortgages?“

There isn’t a check list to say when one should or shouldn’t do a reverse mortgage or whether it’s right or not right for them. It’s very personal for everyone.

The first evaluation should be to determine if they qualify, i.e. they are old enough, the property qualifies, and they have enough equity to pay off any current mortgage(s).

Generally we say the reverse mortgage is not right for one who plans on moving in a short period of time. However I have seen where it has been a huge benefit to seniors and their families even when the home is sold in a short period of time after the closing. One needs to be educated on the pros and cons of the reverse mortgage for their situation and then decide if it will meet their needs.

One should work with a reverse mortgage originator who will take time to meet with the borrower and discuss their needs, goals, and situation and help them evaluate whether the reverse mortgage might benefit them or whether another option may better suit their situation. I’ve provided a checklist of questions to ask an originator in my blog article “Don’t Let Fear Keep You From A Reverse Mortgage… But Know What To Look For In A Lender.” On our Reverse Mortgages SIDAC website I have an updated version of this check list at http://rmsidac.com/WhattoConsiderWhenTalkingtoLenders.php.

Another article that may help is: “A Reverse Mortgage…Or? Other Options To Consider.”

I recommend you meet with a local originator rather than working with a lender from another state who just mails you an application package. You’ll receive more personalized service and information. We meet with our Minnesota seniors and usually spend two hours with them explaining the details of reverse mortgages and reviewing their situation along with the pros and cons. This is even before we do an application. The application is done in person, generally at their home, where we spend another hour and a half to two hours.

Do you go to a plumber if you are having health problems? No, you go to a doctor. And you don’t go to a generalist if you have cancer or heart disease, you go to the specialist. The same is true for a reverse mortgage, go to a reverse mortgage specialist/expert to get the facts and options for one’s situation then decide what will best fit your situation.

Hope this information helps you with your decision to explore a reverse mortgage to determine if it might be right for you.

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.

Find security, control in retirement

Posted on February 8, 2011 by Beth Paterson, CRMP

In retirement, top priorities are often estate planning, protecting investments and traveling. But large monthly home payments, high interest rates, foreclosures, home repairs and medical expenses can make doing those things difficult.

A solution to finance retirement, no matter one’s circumstances, may be a reverse mortgage.

A mortgage with special terms for homeowners 62 and older, a reverse mortgage has no income or credit score qualifications, and no monthly payment requirements, which offer many advantages for senior homeowners.

Recently, I worked with a couple in their 70s that needed some additional funds for home repairs, including a new energy efficient furnace. Anticipating future medical expenses, they liked that through a reverse mortgage they could get money for their immediate needs, eliminate their mortgage payment and still have funds for their future needs with a growing line of credit.

In a reverse mortgage, a homeowner still owns their home. Those who enter a reverse mortgage continue to be responsible for their taxes, homeowners insurance and maintenance of the property.

In a standard mortgage, homeowners have access to cash from the equity of their home, and also, when the home is sold any remaining equity goes to them or their estate.

In a reverse mortgage, residents also can borrow cash from the equity of their home, and often at interest rates lower than they would qualify for on a regular loan. They do not have to repay that loan until the home is no longer their primary residence.

When the resident is no longer living in the home, if there is any remaining equity, they will receive it just as in a standard mortgage. But if their loan balance is higher than the home can be sold for, there is no liability to them or their estate as long as they do not retain ownership of the home.

Generally, funds received through a reverse mortgage are considered tax-free (one should consult a tax advisor for their individual situation). Social Security and Medicare are also not affected and Medical Assistance and other public benefits can still be received.

A single woman I worked with appreciated that the reverse mortgage was explained to her and her children so they could all understand the details. With no restrictions on how the funds are used, after doing the reverse mortgage she got new windows and siding as well as took a vacation with her daughter.

Another couple I recently helped used their reverse mortgage to pay off their current mortgage and eliminate monthly payments. Not having to make payments, the husband was able to retire – a much awaited and deserved event at the age of 70.

A reverse mortgage has allowed thousands of Minnesota seniors to remain in their home with security, independence dignity and control no matter what their circumstances.

*** Written by Beth Paterson, MLO #342859, as Guest Colomist in The Edina Sun Current, Edina, MN Thursday, Feb. 3, 2011 www.minnlocal.com Sun Newspapers

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.

A New Reverse Mortgage Option, The HECM Saver… Is It A Good Option for Seniors?

Posted on January 26, 2011 by Beth Paterson, CRMP

AS OF OCTOBER 1, 2013 THE HECM STANDARD AND HECM SAVER PRODUCTS ARE NO LONGER AVAILABLE.

In 1989 FHA insured the first HUD reverse mortgage known as the Home Equity Conversion Mortgage or HECM. Through the years it has pretty much been the same until October 2010 when HUD introduced the HECM Saver. Before determining if the HECM Saver is a good option one must first have an understanding of reverse mortgages.

A mortgage just like any other mortgage, the reverse mortgage offers special terms for seniors home owners 62 and older. Advantages for seniors are with the reverse mortgage there are no income or credit score requirements and no monthly payment requirements.

The Principal Limit or maximum loan amount is determined by the home value or FHA Lending Limit, the age of the youngest borrower (the older one is the more they can receive), the Expected Interest Rate, and the program chosen. The funds available can be received in a lump sum, monthly payments, or a line of credit. The monthly payments can be structured as one needs or for life as long as the home is the primary residence. Funds in the line of credit grow so more funds can be available in the future.

The borrowers keep the title to the home and are responsible for taxes, insurance, and maintaining the home. Unlike a conventional loan the interest accrues, increasing the balance with no payments due until the home is no longer the primary residence of the borrowers. In addition, the reverse mortgage is a non-recourse loan which means there is no personal liability to the borrowers or their estate for repayment if they or their estate are not retaining ownership. Remaining equity goes to the borrowers or their heirs.

One can have a trust, life estate, or receive Medical Assistance, Elderly Waiver or other public benefits. In the case of a couple even if one of the borrowers goes into the nursing home or passes away, the other one can stay in the home. Not considered income, Social Security and Medicare are not affected.

With no limitations on how the funds can be used, through the years hundreds of thousands of seniors have benefited from the reverse mortgage allowing them to stay in their home and have security, independence and control.

However the closing costs often scare people away. As with a conventional loan, there are traditional closing costs including an origination fee, appraisal, title fees, title insurance and recording fees. With the FHA HECM borrowers also pay a mortgage insurance premium (MIP). Because the fees are upfront, they are often perceived as high.

With the introduction of the Saver, which has all the same features of the original HECM, the upfront FHA Mortgage Insurance Premium is 0.01% compared to 2.00% which helps reduce the upfront closing costs. But it also reduces the Principal Limit available to borrowers.

The HECM Saver could be beneficial to those who don’t want to pay as much in the upfront closing costs but also don’t want to use as much equity from their home. It can be ideal if one plans on moving in a shorter period of time or has a higher home value and wants to preserve more of the equity.

Tim and Mary have a conventional mortgage and they would like to eliminate the mortgage payments. In addition they want to pull out as little of the equity as they can. The HECM Saver is ideal for their situation because there are enough proceeds to pay off their current mortgage and use less of their equity.

Judy considered the HECM Saver but has chosen to go with the HECM Standard adjustable rate because after paying off her current mortgage and some other debts, she will have more funds in a line of credit for future use.

One must always look at their situation to determine which program will work best for their circumstances. A consideration while reviewing the options between a HECM Saver and the HECM Standard (the original program), is whether in a few years one will have used all the proceeds from the HECM Saver and will need more funds. While one can refinance a reverse mortgage when refinancing a mortgage one pays the closing costs again (just as is done with a conventional mortgage) and the first mortgage must be paid off.

Consequently while saving on the upfront MIP with the HECM Saver, if more funds are needed at a future date, it could be more costly when refinancing by paying the closing costs a second time. And one may or may not even qualify to refinance their HECM Saver.

So is the HECM Saver a good option for those seeking a reverse mortgage? It certainly should be an option considered and could be a good option depending on one’s circumstances.

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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.

How Do Reverse Mortgages Compare to Conventional Mortgages?

Posted on September 26, 2010 by Beth Paterson, CRMP

A Reverse Mortgage is similar to a conventional mortgage because it is a lien against the property and the title remains in the name of the borrower. As with the conventional mortgage, the reverse mortgage borrower is responsible for maintaining the property and paying the property taxes and insurance and association dues if applicable.

The costs are also similar to the conventional loan including an appraisal, title insurance, settlement fees, origination fee, and recording fees. Additional costs with the HUD Home Equity Conversion Mortgage (HECM) reverse mortgage are the FHA Mortgage Insurance Premium (MIP) and a monthly service fee. Note that on a conventional loan the servicing fee is included in the interest rate, whereas it is a separate fee with the reverse mortgage. If one is doing a “forward” FHA loan, they too will have the FHA Mortgage Insurance Premium.

To determine the loan amount on a conventional loan, the lender looks at the home value, credit worthiness, income, assets, and other potential risks that may be associated with loan repayment. The reverse mortgage is different because there are no income or credit score qualifications. The age of the borrower(s), the home value, and the expected interest rate are used for determining the loan amount.

With the conventional mortgage one receives a lump sum and has to make monthly payments. With the reverse mortgage one receive cash without making monthly or immediate repayment. Funds can be received in a lump sum, monthly payments, line of credit, or a combination of these.

A loan term or when the loan is to be paid in full is usually set at 15 or 30 years with a conventional mortgage. A reverse mortgage is to be paid in full when the loan is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower.

As with a conventional mortgage, when the loan is due and payable, the house does not become the property of the lender. The borrower or estate handles the repayment of the loan. When the home is sold with either mortgage the loan is paid off and the remaining equity is the borrower’s or their heirs.

The reverse mortgage is a non-recourse loan which means the loan is paid back based on the fair market value (generally from the sale of the home) with no personal liability to the borrower or the estate .

For seniors 62 and older, the reverse mortgage is generally more advantageous than a conventional loan.

This material my 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-ot

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.

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