Seniors Find Hope and Opportunity With Reverse Mortgages

Seniors find hope and opportunity with reverse mortgagesIt’s the season of hope and new growth and opportunity.  Flowers are blooming, trees are budding, the grass is growing.  As with the season, seniors can find this hope, new growth and have new opportunities that they can remain in their home with security, independence, dignity and control.  And like the many types of flowers, buds and new growth, the variety of how the reverse mortgage funds are used and numerous, basically endless.  Here are some of the ways seniors have found hope and opportunity with their reverse mortgage.

  • 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.Seniors find hope and opportunity with reverse mortgages
  •  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 buy 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.

Seniors find hope and opportunity with reverse mortgagesIt’s fulfilling to me to be able to help seniors find hope, growth, and opportunity with  reverse mortgage (visit the links below for some stories).  A reverse mortgage has given hope and opportunity 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 and opportunity, 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.

© 2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-y9

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.

Senior Loses Home After Listening to “Reverse Mortgages Are Bad” Advice

House goiing into tax forfeitureI got a call from a 65 year old woman, Ann, inquiring about a reverse mortgage stating she owed over $20,000 in back taxes and was facing tax forfeiture in just a few short months.  Ann had no other debt and her home was worth more than $300,000.  Based on her situation, she wouldn’t qualify for a conventional or “forward” mortgage.  Someone had suggested the reverse mortgage a solution to her situation.

I explained that a reverse mortgage is a mortgage with special terms for those 62 and older.  As an FHA insured loan HUD oversees the Home Equity Conversion Mortgage or HECM providing protections like no other financial option.  With the HECM there are no income or credit score qualifications *(see updated information below) and no monthly payment requirements.  The home would remain hers with the title in her name.  And the reverse mortgage funds could pay off her tax debt and she could leave the remaining funds in a Line of Credit with a growth rate for future needs including paying her property taxes going forward.  Or if she chose she could receive monthly payments, a lump sum or a combination of these options.

I went on to explain that the loan would be due and payable when the home was no longer her primary residence or on her 150th birthday.  If at the time the loan was due and payable the home was sold for more than the loan balance she or her estate would receive the difference in funds.  Or if the loan balance was higher than what the home could be sold for, as a non-recourse loan she or her estate would not have to come up with the difference, the FHA Mortgage Insurance covers the difference.

She of course wanted to think about it.  During a follow-up conversation she said she had talked with her brother who told her she shouldn’t do the reverse mortgage because they are bad.  When I inquired why he thought they were bad, she didn’t have a response.  I asked if her brother could come up with the funds to pay her back taxes…  “Maybe.” 

I reiterated the details and benefits of the reverse mortgage emphasizing that the funds could pay the back taxes and she would have funds in a line of credit for her future taxes and that she wouldn’t have to make monthly mortgage payments.  (Borrowers are still responsible for paying property taxes and property insurance.)  I also offered to meet with her and her brother to educate them on the details and facts of the reverse mortgage.

A couple weeks later during another follow-up conversation, she was still hesitant because of her brother’s advice.  I again inquired if her brother could come up with the funds for her back taxes… “No, he doesn’t have that kind of money!With an inquiry if she had another way of coming up with the funds for the back taxes… no she didn’t.  And her brother didn’t want to meet to learn the details and facts of the reverse mortgage.  I explained that if the county foreclosed on her home she would be losing around $280,000 in equity.

Time was getting down to the wire in order for us to have time to process the reverse mortgage so I did one more follow-up call.  She said her brother warned her not to do the reverse mortgage because they were “bad” and expensive.  I reviewed the costs explaining they compare to a conventional mortgage other than the FHA mortgage insurance.  And even beyond that the benefit of the reverse mortgage outweighed the costs… saving her home from foreclosure and the loss of around $280,000 in equity.**

A few months later when I checked the county records, the county was the owner of her property.Lost equity due to tax forfeiture

Listening to her brother who did not know, and was unwilling to learn the details and facts of the reverse mortgage, Ann had lost her home and a lot of equity.  With all the benefits and protections, the reverse mortgage would have made a huge difference in the quality of her life.

It was sad and unfortunate that she listened to the unwise advice of “Don’t do a reverse mortgage, they are bad.”

Next time you hear “Reverse mortgages are bad” or “Don’t do a reverse mortgage” or “One should wait until their 70’s to do a reverse mortgage” remember this story and how the reverse mortgage could have made a difference.

*In April 2015 a Financial Assessment was implemented to determine borrower’s ability and willingness to pay property taxes and insurance into the future.  This safeguard help make the reverse mortgage more sustainable so borrowers can remain in their home.

**Property taxes are levied and collected by counties.  When property taxes are past due after a certain amount of time (redemption period) they go into tax forfeiture.  In most counties across the US, to get their money quickly, the county issues a tax lien certificate or a tax deed and will conduct a sale where the tax lien certificate or tax deed are sold at auction often for only the taxes, penalties and interest due.  The winning bidder receives a legal claim to the tax debt or tax lien certificate.  The property owner has the opportunity to pay off the debt and reclaim the property.  If the owner does not pay back the certificate then the investor often gets the entire property for only the taxes, penalties and interest due.

© 2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-xy

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.

You Need To Know That With A Reverse Mortgage You Remain in Control

Reverse Mortgage borrowers remain in control of their homeWhen sitting down with a new prospect the other day I asked what they had heard or thought about reverse mortgages.  Bob responded that reverse mortgage borrowers lost control of their home and their money.  Have you heard this too?  I want to correct this misconception for you.

Reverse mortgage borrowers remain in control of their home.  They own the home, just like with any mortgage.

They have the option to paint the home the color of their choice, plant trees or landscape as they choose, and to decorate the inside as they desire (or not make changes).

I had one borrower ask if they could paint their house purple.  With a chuckle I responded  they could although the neighbors may not like the color purple.  The point is, as the homeowner they have the option to choose what color they want to paint their house.

Borrowers are, however, responsible for maintaining the home.  This is to the homeowners best interest anyway, and whether they have a reverse mortgage, a conventional mortgage or no mortgage at all.  Maintaining means things like no bare wood or chipped paint, roof replaced when needed, foundation and structure is sound, electrical and plumbing in working order.

In their will or trust the reverse mortgage borrowers still choose who will inherit the home or equity of the home.

While the reverse mortgage borrowers will be using the proceeds for their needs or wants during the term of the loan, when the home is no longer their primary residence, the loan is due and payable.  The loan is generally paid back from the sale of the home with no personal liability to the borrower or their heirs.  If the home is sold for more than the loan balance the borrower or the heirs receive the difference.

If an heir wants to keep the home, they have this option – they would just need to pay off the reverse mortgage balance.  This can be done through a conventional mortgage, their own funds or if they were the beneficiary on an insurance policy.

Note that if the loan balance is higher than the fair market value, as a non-recourse loan the borrower or their heirs only need to pay the fair market value of the home, they do not need to come up with the difference.  With the FHA HUD insured Home Equity Conversion Mortgage (HECM) the FHA Mortgage Insurance will cover the difference for the lenders.

They have the option to sell when they want and choose the real estate agent.  If they have passed away then their estate chooses the real estate agent.

The way one wants to receive their reverse mortgage proceeds is also their choice.  They can receive the funds in a line of credit, monthly payments, lump sum or a combination of these.

And how they use these funds is in their control – lenders cannot dictate how one spends the proceeds from their reverse mortgage.  Borrowers can and have used their reverse mortgage funds to pay for home repairs, purchasing a new car, traveling, home care or whatever one needs or wants… it’s their choice.

Reverse Mortgage borrowers remain in control of their homeThe reverse mortgage provides control for borrowers to have funds so they can make their own choices.  For example, where they want to live (in their own home vs government subsidized housing), who they want to care for them (vs the government deciding which home care agency they can use).

Reverse mortgage borrowers do remain responsible for paying their property taxes, having home owners insurance, maintaining the property and paying home owner association dues if applicable, just as they do with or without a conventional mortgage.

Losing control of your home or money with a reverse mortgage is a misconception.  In reality reverse mortgage borrowers have control and in some cases even more control than without doing a reverse mortgage.  Having funds available gives them more choices and options.

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-v0

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.

It May Be To Your Advantage To Do A Reverse Mortgage Now

Couple benefited from doing reverse mortgage sooner than laterIt may not be to your advantage to heed the advice of those who state a reverse mortgage should be a last resort or one should wait until they are older before doing one.  Let’s explore why doing a reverse mortgage now rather than later may be to your advantage.

First you must know the Principal Limit or Loan Amount of the HUD insured Home Equity Conversion Mortgage (HECM) reverse mortgage is based on the age of the youngest borrower, the lesser of the home value or FHA Lending Limit and the program chosen and the Expected Interest Rate.  HUD allows certain types of properties to qualify: single family homes, duplexes or 1 to 4 unit properties as long as the home owner is living in one of the units, townhomes, FHA approved condos, and manufactured homes that meet HUD’s requirements.

Continued Decline in Real Estate Values and Sales Volume

It appears that the real estate values have not yet stabilized so with potential continued decline in home values, one will receive less funds from the reverse mortgage in the future.  To determine the value of the home the appraiser must use homes that are similar in size, number of bathrooms, bedrooms, style, etc. and that have sold in the last 6 months. If homes in the area are selling for lower values and/or are foreclosures which means less comparables are available and the homes are valued lower.  So before the home values continue to decline, doing the reverse mortgage now will mean more funds will be guaranteed to be available based on the current value.  (Note once the loan closes the funds are guaranteed available to borrowers as long as they meet the terms of the loan.)

Properties that qualify

HUD already has restrictions on condos that are not FHA approved making it difficult to do a reverse mortgage on condos.  (The spot condo approval was removed in 2010.)  We are seeing lenders add manufactured homes, log homes, berm, and rural homes to their list of ineligible homes.  While there are still some lenders who continue to lend on these properties, this may change in the future and they are likely to tighten the underwriting requirements for these types of properties.  If you are in one of these properties you should look at doing a reverse mortgage now while it’s still an option.

Ron who has a manufactured home was in the process of doing his reverse mortgage however during the processing of his loan the lender the loan was being done through changed their underwriting requirements.  Now to proceed with his loan has to be put through another lender.  If other lenders change their underwriting requirements he would not be able to do his reverse mortgage.

Reduced Principal Limits

In 2009 and 2010 HUD reduced calculation of the Principal Limit (Loan Amount) by 10% each year.  In 2010 HUD increased their on-going annual FHA Mortgage Insurance Premium.  While we have not heard this is happening again, given the real estate market and the political climate, HUD may find it necessary to decrease the Principal Limit again and/or increase the FHA Mortgage Insurance Premiums.  Waiting may mean less funds are available if HUD reduces the Principal Limit.

No Servicing Fees/Set-Asides

Currently most reverse mortgage programs don’t have a service fee or service set-aside.  However servicing fees may return in the future which means the service fee set-aside will reduce the net Principal Limit available to borrowers.  Taking advantage of no servicing fee means more funds are available now.

Higher Expected Interest Rates Equals Less Funds Available

With FHA Reverse Mortgages the Expected Interest Rate is calculated weekly and is used to determine initial funds available.  The Expected Interest Rate is considered a long term projection of future interest rates.  Currently the Expected Interest Rate is below HUD’s floor of 5% which means more funds are available. (Expected Interest Rates at 5% or below have the same Principal Limit.)  As the Expected Interest Rate changes to a higher rate, in the future less initial funds could be available to borrowers.  It is unknown as to the timing of when the rates may rise but at some point they will for sure go up.

Even if the home value increases in the future the amount available on the reverse mortgage could be the same or less if you wait to do a reverse mortgage.

Let’s compare doing a reverse mortgage now to waiting 5 years before doing your reverse mortgage.

TODAY 5 Years from now Initial Interest Rate is currently below 3%
AGE 70 75
HOME VALUE $200,000 $225,000
*Based on Expected Rate of 4.39 7.515
AVAILABLE (Approximate net after fees) $122,690 $97,687
DIFFERENCE $25,003
These are all estimates.  Different assumptions would result in different numbers.  Interest rates are based on rates of 10/4/2011.

Keep in mind, with an Adjustable Rate Reverse Mortgage funds left in a Line of Credit grow. So if you have $122,690 in your line of credit today, in the future you could have more funds available to you.  Here’s an estimated example:

Line of Credit Growth* No Draws Draw $5,000 each year
Today $122,690 $122,690
Year 1 Balance $127,357 $122,357
Year 2 Balance $132,201 $122,011
Year 3 Balance $137,230 $121,652
Year 4 Balance $142,450 $121,279
Year 5 Balance $147,868 $120,892
*Growth Rate based on Assumption of Expected Interest Rate of 3.739% in this example.  Actual Line of Credit Grows based on current interest rate plus 1.25%.


What would it be like for you to have security knowing you readily have funds available in your Line of Credit without paying additional closing fees in the future?
  When you use the funds each year you will be taking advantage of having the money you need during your retirement years and the benefit of improved financial health.

Lucy stated, “Having done the reverse mortgage has given me a new sense of security.”

Eliminate Mortgage Payments, Have Lower Interest Expense by Paying Off Your Conventional Mortgage

In addition to a lower interest rate* with a reverse mortgage, eliminating your monthly payment will improve your cash flow because you don’t have to payout that monthly payment each month.  While the loan balance will rise because you are not making payments, the reverse mortgage is non-recourse which means there is no personal liability to you or your estate if the loan balance is higher than what the home can be sold at fair market value in the future.  And you have the use of the funds to use during the term of the loan for whatever you need or want.  By doing the reverse mortgage earlier you have use of funds that otherwise would go toward your monthly payments.  Why not improve your cash flow sooner than later?

Note that you do have the option of making payments with your reverse mortgage – it’s just not required.  You can choose when, how often and how much you want to pay.  When payments are made the payment reduces the loan balance and with the adjustable rate will be applied to the Line of Credit meant it’s available in the future.

*Historically the HECM reverse mortgage interest rate is lower than what one can generally qualify for with a conventional mortgage.

Higher Valued Home Owners Should Do A Reverse Mortgage Before The Lending Limit Is Reduced

Currently the FHA HECM (Home Equity Conversion Mortgage) Lending Limit is $625,500.  While we have not received final notice from HUD, word was received that the Lending Limit would remain at the $625,500 through FY 2012 – but this is an unknown.  At some point this rate could be reduced to $417,000 or be based on a Lending Limit in the county where one lives.  What this means is that if your home is valued more than the Lending Limit amount you can receive is based on the Lending Limit rather than the home value.  For example if your home is appraised at $700,000, currently we would use $625,500 to determine the reverse mortgage Principal Limit.  January 1, 2012 or after, we would be mandated to use $417,000 (or the county lending limit) for this calculation, making a big difference on the amount one can receive.  If you have a higher valued home look at doing your reverse mortgage now instead of waiting until 2012 or after.

Minnesota Reverse Mortgage Borrower Prepared for FutureMary, a Minnesota Reverse Mortgage borrower whose home value, as most homes, had decreased over the last few years chose do to the reverse mortgage at the time instead of waiting even though she didn’t have any mortgages to pay off and didn’t have immediate needs for the funds.  Her decision was based on the fact that if she waited her home value may continue to decrease whereas if she did the loan now she would have the funds in the line of credit for future use and they would grow so more funds would be available when she needs them.  Additionally if she waited the Expected Interest Rate (used to determine how much can be loaned) may be higher making less funds available to her to her in the future.

We’ve talked with seniors whom we originally talked with 2, 3 or 4+ years go and had educated them about the reverse mortgage option.  At that time they decided to wait and not do a reverse mortgage.  Some even did a conventional mortgage or what we in the industry call a “forward” mortgage.  “Life has happened” and they decide they now want to do the reverse mortgage.  Unfortunately with many of these seniors we have to tell them the sad news that less funds are available now and in some cases there aren’t enough proceeds to pay off their current mortgage.  They can be short $6,000, $10,000 and sometimes $30,000 or more.  This is due to decreased home values and changes in the Principal Limit.  We are finding this can also be the case for even those we talked with just 6 months ago.

Now a few years after Mary did her reverse mortgage, Mary is still happy with her decision to do have done her reverse mortgage sooner than later.  She has security knowing she has funds available for her needs, independence to live on her own without relying on others for financial support, she’s maintained her dignity of being able to pay her own bills, and continues having control of her life and the ability to make her own choices.

Doing a reverse mortgage now may be to your advantage.  Are you ready to live with more now?  And to have security, independence, dignity and control in your retirement?

Note that I am not posting this as sales pitch, rather to make you aware of anticipated changes so you can make the best decision for your situation.

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-uP

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

“Our Reverse Mortgage Is Great. Gives Us Some Elbow Room.” And More Testimonies by Reverse Mortgage Borrowers

"Our Reverse Mortgage Is Great."While some people will say they have heard bad things about reverse mortgages I haven’t been able to get the real definition of “bad” or the reasons behind these statements.  However, actual reverse mortgage borrowers have lots of good things to say about their reverse mortgage.   Let me share some of them here.

“The reverse mortgage has allowed me to be able to breathe again and alleviate $tress” S.R.

“My reverse mortgage gives me financial security due to my fixed income.”

“It was a good experience.  The extra money each month is wonderful.” D.M.

“Since my cash assets have been spent down over twenty years of retirement, it became pertinent that my $750 mortgage payment needed to be ended.  I got this far in life seventy eighty years, without a monthly pension.  Now I have funds to supplement my Social Security Income.” D.W

“It’s great not to have to make mortgage payments.” M.L.

“I did the reverse mortgage to have extra money every month for expenses.  It gives me a little more financial freedom.” J.F..

“After retiring I found that my income was too little for the active life I was used to, with trips to family and a modest vacation each year.  But bills were piling up and I needed a real solution to stay in my home. I have my dignity and security back again.”  E.B.

My reverse mortgage has helped me...“The reverse mortgage allows me to have more means to meet future needs.  Having it has taken some of the fear away that I had for the future” C.G.

“I did the reverse mortgage to pay medical bills, credit cards and other debts.  It has made my life less stressful.” C.J.

“The reverse mortgage has allowed me to stay in my home with comfort to do things with my family.” J.T.

“With joy and delight I have felt hope and even vision anew in knowing that this home belongs to me. It comes with a challenge for me to realize that I am accountable in using these funds to achieve goals otherwise not possible.” B.L.M.

“Affords me the ability to retire and make ends meet.” S.G.

“The Reverse Mortgage helps out a great deal and solves many problems.”  C.C.

“As a senior citizen, I had been having some concerns with my finances.  Being on a limited income made much needed household repairs and property tax payments very difficult to meet.  I was going to have to make a choice soon about whether to continue to live in my house, or move on to an apartment.  The costs of continuing to live in my home were getting beyond my means, but I wasn’t ready to leave the home that I had raised my children in.  I decided t use the equity in my house to make life easier and meet the financial obligations that I had.” S.M.

"Our Reverse Mortgage Allows Us To Travel To Florida Every Year."“We can now continue to travel to Florida every winter.”  L.C.

“A reverse mortgage means I’ll have a place to live even in case of serious illness.”  D.B.

“It helps me keep up with bills I cannot cover with my limited income.  It also allowed me to remodel my home to improve it’s value and be more comfortable.  I greatly appreciate it.”  R.D.

“It is really great not to have to be concerned about where the money will come from for my long term care insurance policy payment and emergency repairs.  It has relieved us of a great deal of stress and makes grocery shopping a lot easier too.”  M.S.

“After six years of non-payment of property taxes, nearly four years of confession of judgement, and the home I had lived in for nearly 69 years within weeks of tax forfeiture, the Reverse Mortgage lender Beth Paterson, I worked with came to the rescue with a Reverse Mortgage.  The property taxes are now current for the first time in a decade, and I have a line of credit of approximately $100,000.”  R.W.J.

“The only way we could comfortably stay in our home of 42 years” S.H.Celebrating having a revese mortgage

“Once we realized that we could only relieve the stress on us by contracting 24-hour nursing care for grandma, a reverse mortgage was the only way to do it.” L.T.

“I didn’t have money to keep up with my living expenses so I did a reverse mortgage.  I paid some bills and my credit cards and have some additional funds for future needs.” J.D.

“The relief I feel from not having to make a mortgage payment each month is so great!  Now that my credit card is paid off, I will only need occasional one-time draws from my Line of Credit. To continue living in my home and travel and pursue some hobbies.” E.B.

Keep these testimonies in mind and share them when you hear reverse mortgages are “bad.”  As you can tell, actual borrowers think they are great!

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

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-ut

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.

Live in & cash out, too – Thanks, MN Good Age

Cashing out in your home while living in itAlyson Cummings did a fantastic job on her article in the MN Good Age newspaper, “Live in & cash out, too.”  She had interviewed me a few months ago to learn about reverse mortgages for this article.  She said she couldn’t send me a copy prior to publication so I was nervous on whether she would provide accurate information or stick with the many misstatements that are usually in the media.  Or would she misquote me or print my comments out of context.

With excitement and apprehension I started reading the article the other day when I picked up a copy.  As I read I was pleased to see the acknowledgment and the many quotes.  What was even better was the fact that she did an awesome job providing the facts and quoting me accurately.  I’m proud to have been named and quoted in this article!

Whether you are in Minnesota or elsewhere, this is an article you should read!

Kudos to Alyson Cummings and MN Good Age on an excellent article on reverse mortgages!

© 2011 Beth Paterson http://bethsreversemortgageblog.wordpress.com 651-762-9648

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-tv

Related Articles:

Live in & cash out, too – Thanks, MN Good Age

Cashing out in your home while living in itAlyson Cummings did a fantastic job on her article in the MN Good Age newspaper, “Live in & cash out, too.”  She had interviewed me a few months ago to learn about reverse mortgages for this article.  She said she couldn’t send me a copy prior to publication so I was nervous on whether she would provide accurate information or stick with the many misstatements that are usually in the media.  Or would she misquote me or print my comments out of context.

With excitement and apprehension I started reading the article the other day when I picked up a copy.  As I read I was pleased to see the acknowledgment and the many quotes.  What was even better was the fact that she did an awesome job providing the facts and quoting me accurately.  I’m proud to have been named and quoted in this article!

Whether you are in Minnesota or elsewhere, this is an article you should read!

Kudos to Alyson Cummings and MN Good Age on an excellent article on reverse mortgages!

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-YL

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.

Comparing Reverse Mortgage Closing Costs To A Conventional Mortgage – You’ll Be Surprised They Are Not That Different

Compare Closing Costs for Refinancing Your Home - A Reverse or Conventional MortgageIt seems like every article, report or someone you talk with states the reverse mortgage  closing costs are high.  Have you looked at closing costs on a conventional home mortgage?

As with a conventional home mortgage (called a “forward” by HUD), the closing costs for reverse mortgages may vary depending on the home value and the complexity of the loan.  Let’s compare the costs side-by-side for a Home Equity Conversion Mortgage  or HECM and a conventional/forward mortgage.

The third party and recording fees are standard for any loan.  However, with the 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 or servicing fees.  Look at an estimated comparison based on a Minnesota home valued at $200,000:

Third Party Fees Reverse FHA Forward Forward FHA
Appraisal $450 $400 $450
Credit Report $20 $20 $20
Flood Certification $16.50 $16.50 $16.50
Courier Fee* $25 $55 $25
Escrow, Settlement, or Closing $250 $250 $250
Abstract or Title Search $100 $100 $100
Title Exam $100 $100 $100
Document Preparation $100 $100 $100
Title Insurance $475 $475 $475
Endorsements $100 $100
Recording Fees $92 $46 $92
County/Mortgage Registration Tax $323 $480 $480
Plat Drawing $60 $60 $60
Name Search $30 $30 $30
Special Assessment Search $30 $30 $30
Counseling Fee $125 N/A N/A
TOTAL THIRD PARTY FEES $2,196.50 $2,262.50** $2,328.50

* Courier Fee is for sending a payoff on a current mortgage to the mortgage holder.

** These fees do not include all mark ups/processing fees so these may be higher when mark ups/processing fees are included.

Now let’s compare the Lender Fees:

FHA’s Mortgage Insurance Premium (MIP) is paid directly to FHA.  With the FHA HECM Standard this is 2% of the home value and 2 1/4% for a forward.  The FHA HECM Saver has a reduced MIP.  The advantages with FHA insuring the reverse mortgage include:

  • Guaranteeing the funds are available for you.
  • Guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 3% on the HECM Standard Adjustable Rate) 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.

The origination fee is what the originating lender receives to cover the loan officer’s salary, overhead to run the business, i.e. staff salaries, administration costs, computers, electricity, office supplies, marketing expense, gas mileage, health insurance of employees, etc..  The origination fee also includes the processing and underwriting costs which are generally separate and charged to the borrower on forward loans.  HUD regulates the reverse mortgage origination fee to be 2% of the 1st $200,000; 1% thereafter with a cap of $6,000.  With a minimum of $2,500.

The reverse mortgage fees are based on the full home value because over time borrowers can access more than the home value at the time of origination.

An estimate based on a $200,000 home value:

LENDER FEES REVERSE FHA FORWARD FORWARD FHA
Origination/Points $4,000 $2,000* $2,000*
MIP $4,000 $0 $3.500
Underwriting/Processing $0 $700 $700
SUBTOTAL LENDER FEES $8,000 $2,700 $6,200
Backend fee** $0 $2,000 $2,000
TOTAL LENDER FEES $8,000 $4,700 $8,200
Prepaid Interest*** N/A ++ ++

*Typical points on Forward loans are 0-4%; this example is based on $100,000 loan at 2% points.
** Forward loans often have a 1% back-end fee.
*** Number of points are directly related to interest rate charged; the more points paid the lower the interest rate; the lower points paid, the higher interest rate.

TOTAL LOAN FEES REVERSE FHA FORWARD FORWARD FHA
$10,196.5 $6,952.50 $10,528.50

Note:  THE DIFFERENCE IS BASICALLY THE FHA MORTGAGE PREMIUM!  Refer to above comments on the benefits of FHA insuring the loan.

Because the majority of conventional loans being done now are FHA insured, the reverse mortgage is actually less expensive.

The fees associated with the reverse mortgage are fully financed as part of the loan with no out of pocket expenses other than the FHA appraisal.  (As of 2010 Appraisal Management Companies must be used to order and process the appraisal.  This fee is required to be paid for by borrower up front or “out of pocket.”)  All of the fees must be disclosed on the Good Faith Estimate (GFE).

Keep in mind that there has to be a cost involved because everyone in the transaction needs to be paid for there services.  If the costs on a mortgage aren’t paid up-front then they’ll be paid over time with a higher interest.

When considering whether to do a forward mortgage or a reverse mortgage you must consider if you can even qualify for a forward mortgage; then if you can make the payments over time.  For example, what happens if “life happens,” could you continue making those payments or would you be facing foreclosure?

You also need to consider that if you do a forward mortgage now (if you even qualify), you’ll be paying the closings costs on that loan and then when you need more funds in the future and you refinance you’ll be paying the closings costs again.  These together can equal or exceed the total of the closing costs on the reverse mortgage.

Whereas with the reverse mortgage you pay the closing costs upfront and then without paying closing costs again you have access to more funds through your life as long as you are living in the home as your primary residence.  The additional funds would be either through monthly payments, a line of credit if that is the type of loan you have chosen.

In the big picture the cost of the reverse mortgage is less than a forward mortgage over time because the interest rate is lower on the reverse mortgage.  Therefore typically it doesn’t take too long for a forward mortgage to make up and then exceed what difference there is in closing costs of the reverse mortgage.

Now that we’ve compared the costs side-by-side, are you surprised that they are comparable to a conventional loan?

Article updated May 2012

© 2011-2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-t4

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.

Minnesota 7-Day Cooling Off Period Law is Disservice to Seniors

MN Reverse Mortgage LegislationIt’s coming up on a year since the Minnesota law went into effect requiring a 7-day cooling off period in addition to the Federal 3-day recission period on all refinances.  No matter how much I explain that the law was put into place by legislators with the intention of protecting them, since then every borrower has complained about waiting an extra 7 days.  Borrowers have stated:

  •  “I’m being treated like a child, not letting me decide that I’m ready to proceed.”
  •  “Why do I have to wait extra time, I’ve already waited long enough.”
  •  “How fast can we close?  I’ve already made up my mind.”
  •  “I took a year to decide, I don’t need more time.”
  •  “This takes away my dignity.”

Or variations of the above but all with the same message.

Borrowers have the right to cancel their loan at any time during the processing which usually takes 30 to 45 days.  They are in control of whether they want to proceed or not during the entire time.  And after closing they have the Federal 3-day recission period during which time they can also choose to cancel their loan.  The additional 7 days is an irritation rather than a protection!

Consequently the Minnesota law makers did nothing to protect seniors when they passed this unnecessary law in the 2010 Minnesota Legislation.  If they really want to protect seniors they should look at other things that would be true protections, not putting in unnecessary regulations.

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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/pxPEm-sR.

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.

Reverse Mortgages Are Expensive… Compared To What?

Reverse Mortgages Expensive - Compared to what?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 150th 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 1st $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?

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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


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.