What Gives You A Sense of Independence? A Reverse Mortgage May Provide You These Freedoms!

Posted on July 2, 2011 by Beth Paterson, CRMP

What gives you a sense of independence? When I think of independence I think of having freedom of choices and not relying on others. We all want our independence including seniors. How can seniors maintain that independence, have freedom of choices and not rely on others, the government or their children? A reverse mortgage provides independence for home owners 62 and older.

Having one’s own funds for home repairs, going out to lunch with friends, traveling, visiting family across the country, purchasing a new car, paying medical bills or for medications; paying for help with housework, meal preparation, yard work or transportation, whatever is desired can give that feeling of independence. Being able to pay off a mortgage to improve cash flow to to save one’s home from foreclosure gives one relief and freedoms.

While some assistance may be needed for seniors to remain in their home, not relying on children or the government for help and being able to choose a home care agency of their choice will give them the sense of independence. Using the equity in one’s one with a reverse mortgage can provide seniors the funds for their independence.

“Now I have my dignity back and my independence” was what Edna exclaimed after her reverse mortgage was closed.

Another Minnesota reverse mortgage borrower, Bea, said, “With a reverse mortgage you begin to have independence anew and you begin to feel more secure. Being free from monetary anxiety, you have better control over spending your equity.” The reverse mortgage allowed Bea to pay off a mortgage, then to travel to family weddings and reunions. Several years after she initially did her reverse mortgage more recently Bea is using her reverse mortgage funds to pay for home care that is needed to keep her independent and at home.

Ted, age 91 and Anna age 87, Minnesota homeowners, were proud and didn’t want to discuss their financial situation. However, their son-in-law finally talked to them about doing a reverse mortgage. When I met them and we started the reverse mortgage process, the children and I were told they were doing the reverse mortgage so they could put new linoleum on their kitchen floor. Once the loan was closed I was informed by their children that they had indeed put in the new linoleum along with new windows and they bought some new furniture. The kids were going to Ted and Anna’s and were told, “Don’t pull in the drive way, we just had it blacktopped.” When Ted and Anna went out to eat with their kids, they could pay for their kid’s meals too making them feel good that they could treat their children to a meal.

Then one day Anna and her daughter were sitting at the kitchen table and Anna shared that before their reverse mortgage they used to go 3 days at the end of month without food or even milk because they would run out of money from their Social Security. As they were sitting there and looking at the paper, Anna exclaimed, “Look, Depends are on sale, I can now stock up.”

While Ted and Anna were too proud to let their children know their financial situation initially and they didn’t want to depend on them to assist with their living expenses, once they signed the reverse mortgage documents they kept their independence and had funds for their needs and desires. This also improved their dignity.

A reverse mortgage insured by FHA, an agency within HUD, is known as a Home Equity Conversion Mortgage or HECM. As one of the most protected financial options available for seniors, it allows them to use the equity in their home without looking at income or credit scores to qualify. With no monthly mortgage payments, cash flow can be improved by receiving money in monthly payments, a line of credit, lump sum or a combination of these.

The title remains in the borrower’s name and the loan is not due until the home is no longer the primary residence, when they die, sell or move or on their 150th birthday. Repaid from the sale of the property, as a non-recourse loan if the loan balance is higher than what the home can be sold the borrower or their heirs are not responsible for the difference. If the home is sold for more than the amount due then the borrower or their heirs keep the difference.

As you bring out the red, white and blue, hang your flags and gather with family to celebrate the independence of this great country of ours, ask what independence means to your loved ones. What is needed to help them remain independent and in their home, not relying on the government or on you, their children. Then explore a reverse mortgage, get the facts about them, and see if it might be an option for their situation to maintain their independence. Happy Independence Day!

This material may 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-sD

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 Are Expensive… Compared To What?

Posted on June 28, 2011 by Beth Paterson, CRMP

Everywhere you turn you hear or see in print that reverse mortgages are expensive. I wonder what they are comparing them to to come up with this statement.

A conventional mortgage where one has to qualify for the loan based on income, credit, assets and ability to make the payment? Where the interest rate is based on one’s income, credit, and assets? Where one has to make monthly payments? Where the loan has to be repaid in full either from the sale of the property or from assets? Selling and moving? Where there are fees for a realtor, closing fees, moving costs and rent? Do they really think these options are less expensive?

Have you compared the reverse mortgage to a conventional mortgage? Let’s take a look:

Terms	Conventional Mortgage	Reverse Mortgage
Retain Title/Own Home	Yes	Yes
Use Home For Collateral	Yes	Yes
Lien Placed Against Property	Yes	Yes
Income Requirements	Yes*	No
Credit Score Requirements	Yes*	No
Monthly Payment Requirements	Yes*	No
Repayment Term	15 years, 30 years, etc*	When home is no longer primary residence or 150^th birthday of borrower
Closing Costs	Origination fee, third party fees, possibly FHA Mortgage Insurance	Origination fee, third party fees, FHA Mortgage Insurance Premium**
Amount To Be Repaid	Loan Balance	Loan Balance
Non-recourse, there is no personal liability to the borrower(s) or their estate	Not an option – full loan balance is due and would be paid from the estate if not from the sale from the home	Yes, the estate would NOT have to come up with the difference if the loan balance is higher than what the home can be sold for (fair market valued)

*Terms and interest rate is determined by income, assets, credit score, ability to make payments and points.

** When costs are compared side-by-side the difference is the FHA Mortgage Insurance Premium. And the FHA MIP provides many benefits to senior homeowners who do a reverse mortgage.

Compared to Selling and Moving? Let’s take a look.

Terms	Selling & Moving/Rent In Senior Housing	Reverse Mortgage
Retain Title/Own Home	No	Yes
Credit Score Requirements	Yes (rental properties look at credit and income to determine if you’ll be able to pay the rent or need to rely on government programs)	No
Monthly Payments Requirements	Yes, Rent. Rent in Assisted Living will range from $2,500 to $8,000/month depending on services. Additional services, i.e. home care, will be additional.	No
Realtor/Originator Fee	4% to7% Realtor Fee. On a $200,000 home = $8,000 to $14,000.	Origination Fee is 2% on the 1^st $200,000; 1% thereafter max of $6,000. On a $200,000 home = $4,000.
Third Party Fees/Other Fees	Yes	Yes; FHA Mortgage Insurance Premium
Non-recourse, there are is no personal liability to the borrower(s) or their estate	Not applicable	Yes, the estate would NOT have to come up with the difference if the loan balance is higher than what the home can be sold for (at fair market value)

Where else can one access funds with these benefits for the cost of the FHA Mortgage Insurance Premium? To say the reverse mortgage costs are high compared to a conventional mortgage or to selling and moving is like comparing apples to oranges.

So I still ask, reverse mortgages are expensive? Compared to what?

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-sm

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.

We Are Not Chicken Littles – The Sky Is Not Falling In the Reverse Mortgage World!

Posted on June 22, 2011 by Beth Paterson, CRMP

With Bank of America and Wells Fargo exiting the reverse mortgage industry along with the picture the media paints, I’m reminded of the story of Chicken Little thinking the sky is falling, looking at the doom and gloom. Or jumping to the conclusion that because they have left the industry the reverse mortgage option is going away.

However, the sky is not falling in the reverse mortgage world! Reverse mortgages are still available and a viable option for senior home owners.

There are still lenders lending, some new ones even entering the industry. FHA is still insuring the Home Equity Conversion Mortgage (HECM), covering the risks for the lenders when the home values drop. Investors are still investing in reverse mortgages. Servicers are still servicing reverse mortgages.

HUD still guarantees the funds are available for borrowers. Monthly payments are still not required. The loans are still non-recourse which means no personal liability to the borrower or the estate if the loan balance is higher than what the home can be sold for at the time the loan is due and payable; the FHA Mortgage Insurance Premium covers the difference. Reverse mortgage borrowers still have protections including the required counseling by a third-party HUD trained and approved counselor. The HECM Standard, HECM Saver and HECM Home Purchase programs are all still available.

Seniors still own their home. The majority of people want to remain in their home. Staying in one’s home can be less costly than moving and renting in senior housing. The reverse mortgage remains a viable option to help seniors remain in their home.

Reverse mortgage interest rates are still low. The funds can still be received in monthly payments, line of credit, a lump sum or a combination of these. The line of credit still has a growth rate. The monthly payments to the borrowers can still be received as tenure/for life or structured as one needs. Reverse mortgage funds are still generally considered tax free. Social Security and Medicare are still not affected by a reverse mortgage. Medicaid (Medical Assistance in Minnesota) can still be received with a reverse mortgage.

The funds can still be used for: Paying off current mortgages and helping one out of foreclosure. Paying for home repairs and home modifications, medical expenses, home care and long term care. Paying taxes and protecting other assets. Fulfilling dreams or whatever one needs or wants.

In the world of Reverse Mortgages SIDAC, we are NOT Chicken Littles, the sky is NOT falling. We ARE STILL offering reverse mortgages through lenders who are committed to helping seniors stay in their home and have security, independence, dignity and control.

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 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.”

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.

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-pq

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.

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.

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.

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