Reasons to obtain a Reverse Mortgage

Posted on April 10, 2019 by Beth Paterson, CRMP

I often hear that people think the reverse mortgage is only for those with an immediate need on their current home. While this is one reason one obtains a reverse mortgage, there are five general reasons to obtain a reverse mortgage. Let’s explore all of these.

Needs based or improving cash flow: Need funds immediately for covering living expenses or wants to eliminate the current mortgage payments.

Lisa and George had a small mortgage remaining on their home. It was difficult to make the monthly payments so they obtained a reverse mortgage to eliminate the payments. There were remaining proceeds that they left in a Line of credit for future use. And they are still paying their property taxes and insurance.

Joe needed a hearing aide but couldn’t afford it with his Social Security benefits. Rather than taking money from his savings, he obtained a reverse mortgage. He also used some of the money to put new siding on his home.

Maintaining lifestyle: Having funds for travel, buying a car, purchasing vacation home; fulfilling dreams or meeting goals.

To fulfill dream of traveling Helen obtained a reverse mortgage

Helen was struggling to meet her living expenses with just her Social Security Benefits. She also had always dreamed of traveling. The reverse mortgage provided the extra cash she needed and she was able to fulfill her dreams of traveling

Bob’s wife passed away so her Social Security was no longer received. To replace the 2nd Social Security check his financial advisor suggested a reverse mortgage so he could stay in his home and maintain his lifestyle. The reverse mortgage paid off his current conventional mortgage and eliminated his mortgage payments – this improved his cash flow. Then Monthly Draws were set up to add the extra money he needed each month to maintain his lifestyle. Additionally funds were left in the line of credit for future needs.

Protecting or delaying draws from other investments: Using the reverse mortgage to tap home equity rather than accessing other investments or retirement funds that may have penalties or are taxable; let the investments or retirement funds grow so more retirement funds are available later in one’s life; use the home equity so other investments can be left as the inheritance.

Dorothy closed on her Home Equity Conversion Mortgage (HECM) reverse mortgage as a tool to strategically manage her assets and the benefits she has received from her reverse mortgage. She’s used the funds for home repairs and travel, and hasn’t had to use her investments.

Reverse mortgage provides funds to enjoy retirement and have funds for future

In their mid-70’s, Pat and Mary planned for their retirement. But as their life changed they found there wasn’t enough money to last through the end of the month. With the reverse mortgage in place providing monthly cash flow and a line of credit for other needs, Pat and Mary’s retirement funds may be protected for their future. They are living their retirement years with a good plan along with funds for their current needs. Now they have more money at the end of the month – what a way to live in retirement!

Ray used a reverse mortgage on his primary residence to build a new lake home. Using the reverse mortgage for this purpose meant he didn’t have to tap into other retirement investments, yet created a new investment. His plan is in 10 years to start using his other retirement funds.

Planning for financial or long-term care needs (Standby reverse mortgage): Taking the reverse mortgage at a younger age then leaving in the line of credit, which grows to have funds to draw from in the future when “life happens.”

Charles and Sharon both in their early 60’s used the reverse mortgage to pay off their conventional mortgage. Since they were still working, they continued to make payments on their reverse mortgage. Their plan is to pay down the reverse mortgage loan balance and increase their line of credit so it grows for their future long-term care needs.

Purchasing a new home: Whether downsizing, moving closer to family or buying a dream home or investment property, the reverse mortgage can be used for the financing.

Purchase a new one-level home to meet changing health needs

Richard and Lou needed a one-level home to eliminate stairs that were getting hard to navigate. Instead of using conventional financing or paying cash, they used the HECM for Purchase (H4P) Adjustable Rate. Using cash from the sale and the H4P, they were able to purchase their dream home at a higher value than paying cash would have allowed, have funds for moving expenses and still have funds in a line of credit.

Mike and Carol decided they needed a one-level home to fit their changing health needs, they used the Home Equity Conversion Mortgage HECM for Purchase to purchase their new home instead of using conventional financing. This benefitted their cash flow and meant they didn’t have to tap other retirement funds.

Jim and Paula used the fixed rate reverse mortgage to purchase a new home closer to their children.

Would you like to explore a reverse mortgage for your situation? Contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.

For other states, contact your local reverse mortgage specialist who is a broker, one who works with several lenders, has their Broker License/NMLS and preferably holds the Certified Reverse Mortgage Professional (CRMP) designation.

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: https://wp.me/p4EUZQ-2AP

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 documents are a way to sign your own declaration of independence

Posted on July 3, 2018 by Beth Paterson, CRMP

sign your own declaration of independence with a reverse mortgage July 4th we celebrate Independence Day in America honoring the day our country signed the Declaration of Independence. Signing the reverse mortgage documents is a way for seniors 62 and older to sign their own declaration of independence.

Independence is defined as “freedom from the control, influence, support, aid, or the like, of others.” This fits senior’s attitudes, they want to maintain control of their life, make their own decisions and not depend on others for assistance.

Being able to pay off a mortgage to improve cash flow gives one relief and freedoms. Planning and have funds for the future and long-term care needs as well as protecting other assets and/or delaying taking out Social Security are other ways to have independence.

A new one-level home making it easier to age in place, moving closer to children yet remaining independent are made possible using a reverse mortgage HECM for Purchase.

Some assistance may be needed for seniors to remain in their home such as home care or medical equipment. However, 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.

Remain independent with a reverse mortgage 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 Bea used her reverse mortgage funds to pay for home care that was 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 obtaining 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.

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.

Dorothy closed on her HECM reverse mortgage as a tool to strategically manage her assets. The benefits she received from her reverse mortgage include independence and security. She’s used the funds for home repairs & travel, & hasn’t had to use her investments.

Offering the most flexibility of payment options or no payment, with no monthly principal mortgage and interest payments required, cash flow can be improved by receiving money in monthly payments, a line of credit, lump sum or a combination of these. With the growth rate, the line of credit is a wonderful tool for retirement and long term care planing.

The title remains in the borrower’s name and the loan is generally not due until the home is no longer the primary residence of the borrower(s), 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 at fair market value 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.

Working with an estate planner, a reverse mortgage helped Mary plan her retirement so she has funds for emergencies, medical expenses, traveling, leaving something for her heirs, and enjoying life with independence and not be dependent on her children.

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, discuss what independence means to your loved ones. What is needed to help seniors remain independent and in their home, not relying on the government or on their children? Then explore a reverse mortgage, get the facts about them, and see if it might be an option for your situation to maintain their independence.

You just might find, as over a million others have, obtaining a reverse mortgage may be just like signing your own Declaration of Independence – then celebrate your independence.

Happy Independence Day!

If you’d like to explore creating your own declaration of independence, contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.

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: https://wp.me/p4EUZQ-1QV

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.

Do you know your long-term care options and why to consider financing with a reverse mortgage?

Posted on May 7, 2018 by Beth Paterson, CRMP

Education and planning are the keys to making decisions especially when it involves care while aging. You need to be proactive and know what resources and options are available. With the education and a plan you have more options and can be proactive rather than reactive.

As Forest Gump said, “Life is like a box of chocolates, you never know what you’re gonna get.” This is especially true for aging. I was fortunate to participate in and be considered a trusted advisor at a Minnesota Private Duty Home Care Conference, “Keeping Mom and Dad at Home”. During the conference attendees were encouraged to plan the future as they would a trip, looking at what would they put in their suitcase for the journey of aging and be prepared for what isn’t known to happen along the way.

Conference attendees reviewed what is known about seniors and their families. We looked at what is known about seniors:

They underestimate their situations
They don’t want to worry or be a burden to their children
So seniors don’t tell their children what’s going on
They want their families help
Families often don’t have the time or the financial means to help
Role reversal is uncomfortable
They are fearful of nursing homes and moving
93% say they want to stay in their home

Then we looked at what we know about the families of seniors:

They want to help
They are busy; they are the sandwich generation dealing with their own family, careers, life
They see changes but don’t know what they mean or what the warning signs are
They may become frustrated with their parents denials
Role reversal is uncomfortable
It’s generally women who are doing the caregiving.

Consider what’s important to the seniors, what do they want for their journey? It’s important to involve the seniors in the process, the plan, and have them agree with the plan. Discuss their wishes along with what you think is needed. What will provide them their security, independence, dignity and control of their life? Including a mediator and/or trusted advisor is a good idea. If they are resistant to bringing someone else in, discussing their options, or accepting outside help, tell them that they may not need this but that you do.

By being educated and having your plan in place if a crisis occurs means more options will be available along with decreased costs. Being reactive at a time of crisis means less options are available along with greater costs. Emotional and reactive decisions make for poor choices and actions made from regret and guilt.

Part of the education and planning means getting the facts. Unfortunately we have been conditioned to think that seniors will end up in a nursing home; that an assisted living facility provides all the care needed; that home care is short-term and the nursing home and/or assisted living is safer than being at home.

We need to recondition our thinking:

Seniors can live at home indefinitely
Home care can provide a nursing level of care at home
Living at home can be safer; you receive a 1 to 1 ratio of care versus 1.5 or more of care per person
Living at home is affordable

Let’s compare the costs of some options:

Home Care 1	$1,404/month	3-hour visits, 4 days a week, $27/hour
Home Care 2	$3,276/month	4-hour visits, 7 days a week, $27/hour
Home Care 3	$4,914/month	6-hour visits, 7 days a week, $27/hour
Home Care 4	$8,500/month	24-hour or live in care, one-on-one care, $275/day; includes a live in caregiver and frequent visits from a RN
Assisted Living Rent	$3,585/1-bedroom/month	Care packages range from $300 – $2,700; additional care would be charged per hour by a home care agency
Assisted Living Rent & Home Care 1	$4,989/month	One bedroom apartment rent plus additional care at 3-hour visits, 4 days a week, $27/hour from home care agency
Assisted Living Rent & Home Care 2	$6,861/month	One bedroom apartment rent plus additional care at 4-hour visits, 7 days a week, $27/hour from home care agency
Assisted Living Rent & Home Care 3	$8,499/month	One bedroom apartment rent plus additional care at 6-hour visits, 7 days a week, $27/hour from home care agency
Nursing Home	$8,000 – $12,000/month	Single or double room, level of care and facility amenities

This information and these home care and senior housing figures are a compilation provided by the home care agencies; are approximations and can vary by company and geographic area. Additional home care and senior housing costs were obtained from Genworth Financial, Inc. Cost of Care Survey.

Living in assisted living vs staying at home with a reverse mortgage:

	Selling	Staying in home with a Reverse Mortgage
Details: Home Value $200,000; 80 year old borrower		(reverse mortgage funds available will depend on age, generally the older one is more funds available and the program chosen)
Third Party Closing Costs	$1,811	$1,811
Less Real Estate Agent/RM Origination Fee & FHA Mortgage Insurance Premium	$12,000 (6%)	$8,000 (2% origination + 2% FHA MIP)
Net Proceeds	$186,119	$102,788 in line of credit; $673 a month tenure-for life of the term of the loan and abiding by the terms of the loan; or term draws structured as needed (based on rates of 2/6/2018; rates change weekly.

Now let’s take the net proceeds and compare living in an Assisted Living to living at home and receiving home care.

Selling and Living in an Assisted Living¹

Living at Home using a Reverse Mortgage²

$186,119 ÷ $3,585 (rent only) = $43,020/year or 4 years 4 months

No remaining equity from home.

No rent or mortgage payment as long as you live in the home as your primary residence

The tenure draw of $673 would cover property charges

Borrower is still responsible for household maintenance, i.e., taxes, insurance, utilities and stay in your home as long as primary residence (i.e., approximately $585/month for a $200,000 home)

May have retained equity depending on how long you stay in the home and the home appreciation. The loan is non-recourse.

$186,119 ÷ $4,989 (rent and Home Care) = $59, 868/year or 3 years 1 months

No remaining equity from home.

Roof over head; funds to cover home care 1 with term draws from RM = 5 years 4 months³

Additionally it is likely that there would still be retained equity in the home after the 5.3 years. (Based on 4% appreciation $99,318 in equity would be remaining.)

$186,119 ÷ $6,861 (rent and Home Care 2) = $82,332/year or 2 years 3 months

No remaining equity from home.

Roof over head; funds to cover Home Care 2 with term draws from RM = 3 years 4 months³

Additionally it is likely that there would still be retained equity in the home after the 3.33 years. (Based on 4% appreciation $93,098 in equity would be remaining.)

Then where will you go?

Some assisted living will accept Medical Assistance or other public programs such as Elderly Waiver, however, your choices may be less.

You can stay in your home and have a roof over your head without rent or mortgage payment even after funds from a reverse mortgage are used.

Medical Assistance or other public programs such as Elderly Waiver or Alternative Care can be received even with a reverse mortgage. Reverse mortgage does not impact receiving Medicare or Social Security.

1These rates do not take into consideration rent increases (3%-4% annual according to Genworth Financial, Inc.); it’s likely that the number of years the net proceeds would cover will be less.
2With the reverse mortgage there is a growth rate factor that is passed along to the borrower.
3This time can be extended if you are receiving Medical Assistance or other public programs such as Elder Waiver or qualify for Medicare covered Home Care.

You have choices and can have control over where want to live and the care you receive. You have the right to say, I want to stay in my home (or keep my parents in their home). When educated and with a plan for the journey, life will be easier.

If you’d like to remain at home and have funds for financing your home care, contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.

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.

Home for the Holidays…Creating A Wonderful Life for your Older Loved Ones

Posted on December 12, 2017 by Beth Paterson, CRMP

Home for the Holidays, Staying at home With the families gathering for the holidays now is a good time to discuss memories, dreams and desires with our senior loved ones. One of the most important things to keep in mind is having an understanding of the senior and considering what they want. As George Santavana stated, “Before you contradict an old man, my fair friend, you should endeavor to understand him.”

Our seniors are valuable to our families and to our society. They are not just a potted plant in the corner that looks beautiful. They bring experience, knowledge, history and a sense of who we are. They have and continue to contribute to our world. While we treasure other things that are old, we often discount our senior’s opinions, needs and desires.

Sister Mary Germma Brunke wrote, “It is the old apple trees that are decked with the loveliest blossoms. It is the ancient redwoods that rise to majestic heights. It is the aged wine that tastes the sweetest. It is ancient coins, stamps and furniture that people seek. It is the old friends that are loved the best. Thank God for the blessings of age and the wisdom, patience and maturity that go with it. Old is wonderful!”

Remaining at home with a Reverse Mortgage How can we help make “old” wonderful? As you are visiting with your loved ones ask them what they remember about moving into the house they first purchased, what they like about the neighborhood. How do they feel about where they are living now. Have them share memories of their friends from their youth and what they treasure about the friends in their life now. What do they cherish? What has value to them? What’s important to them?

Have your loved ones define security and find out what gives this security to them. From their viewpoint what does it mean to be independent? How do they define dignity in their life? What do they need to feel they still have control and choices in their life?

Listen to them without making judgments. If they repeat the same story several times, look at it as a process or stage they are going through. It doesn’t mean they have dementia, it may just mean that something about that time in their life has a significant impact on their life. Find out the details of that time of their life and what it means to them now.

There’s a wonderful book by David Solie, M.S., P.A., “How to Say It To Seniors: Closing the Communication Gap with Our Elders” that provides insight into understanding and gives great suggestions on how to have the discussions with your loved ones.

Discuss memories of being in their home As you listen to the answers of your loved ones are you discovering that they want to stay in their home? Are they struggling financially? Do you need a little extra help with chores or getting out to church or visiting with friends or going to a movie? Do they need some physical therapy to help be able to do what they desire? Is nutrition and meals a concern? Would assistance in bathing be helpful? Would some medical equipment help them remain at home more comfortably?

There are many options available to help seniors meet their needs and desires. If they want to stay in their home and need some extra cash, consider a reverse mortgage. If they want to move to a home closer to you or to downsize, consider using a reverse mortgage for the financing. If they need some extra help, a home care agency can help them. Home care agencies provide companion services, meal preparation, medication reminders, bathing and skilled care. Physical therapy can be brought into the home. Adult Day Services are an often overlooked option. And if the family dynamics come into play, a Geriatric Care Manager can help facilitate as well as assist in determining needs and resources.

Senior Companionship“Aging is not ‘lost youth’ but a new stage of opportunity and strength.” (Betty Friedan) Let’s honor our seniors at this stage of their life with the value they provide to us and with the opportunities available to meet their needs and achieve their desires.

Reading some of my other blog articles will help provide you and your loved ones with information to help their life to be wonderful:

For further details on the reverse mortgage contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible. For other states, contact your local reverse mortgage specialist who is a broker, one who works with several lenders, has their Broker License/NMLS and preferably holds the Certified Reverse Mortgage Professional (CRMP) designation.

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.

Solving The Reverse Mortgage Puzzle For You

Posted on August 10, 2017 by Beth Paterson, CRMP

Solving Reverse Mortgage Puzzle I’ve always loved doing puzzles and problem solving whether doing jig saw puzzles or finding resources and solutions to various issues. Much of this led me to the reverse mortgage industry back in 1999. Unfortunately, I come across many who still find the reverse mortgage puzzling. So let me help solve this puzzle for you.

We assisted solving Marion’s puzzle. Recently widowed, Marion’s income changed because with the passing of her husband she was now only receiving one Social Security check. Having recently moved to a new home, she did the reverse mortgage to do some updates on her home and improve her cash flow into her future retirement years.

The majority of seniors want to remain in home. Depending on report, it’s somewhere between 80% and 90+%. A reverse mortgage is an option to help them remain in their home and have improved cash flow for current or future needs.

A reverse mortgage is a mortgage like any other mortgage where borrowers retain title and borrow against their home equity, but the reverse mortgage offers special terms for seniors home owners 62 and older.

The Home Equity Conversion Mortgage, or HECM, is the most common reverse mortgage and only one available in Minnesota. The HECM was first insured by FHA in 1989 for the purpose of providing a valuable financing alternative for senior homeowners to help them remain in their home and have access to funds by withdrawing a portion of their home equity.

To determine the Principal Limit or the maximum funds available at closing, HUD’s formula is the age of the youngest borrower or non-borrowing spouse, the Expected Interest Rate, the program chosen and the lower of the home value or FHA Lending Limit, currently $636,150, or in the case of a home purchase or home purchased in the last 12 months, the lower of the appraised value or purchase price.

Borrowers must meet HUD’s Financial Assessment requirements to qualify which means we obtain documentation demonstrating their ability and willingness to pay property taxes and insurance into the future. In some circumstances a Life Expectancy Set Aside (LESA) may be required to cover the property taxes and insurance.

The net amount available is based on the Principal Limit, less closing costs, paying off any mortgages, liens and/or judgements, and the LESA if required.

If all available funds are used to pay off current mortgages or liens, the borrower’s cash flow will still improve because the monthly mortgage payment is eliminated.

Unlike other mortgages, an advantage for seniors is with the reverse mortgage there are no monthly payment requirements although borrowers are responsible for paying property taxes and insurance. While monthly payments aren’t required, one can make a payment or payments when and how much they choose.

The interest rate depends on the program chosen and is either adjustable or fixed. While an adjustable rate often scares people, that is because on a conventional mortgage if the interest goes up, so does one’s payment. With the reverse mortgage, because monthly mortgage payments are not required, this is not a factor. It only impacts the amount that needs to be repaid when the loan is due and payable.

Offering more flexibility with the Adjustable Rate option, the funds available can be received in a lump sum, monthly payments, a line of credit or a combination of these. The monthly payments can be structured as one needs (term) or for life as long as the home is the primary residence (tenure). Funds in the line of credit grow so more funds can be available in the future. The line of credit growth rate is a feature that makes the reverse mortgage a tool for financial and long term care planning.

The fixed rate option requires funds to be pulled only as a lump sum draw. The draw amount is limited to the 60% of the Principal Limit (an additional 10% is available in some circumstances).

Because the closing costs are up-front, they are often perceived as high. On conventional mortgages people usually focus on the payment and interest rate, not really looking at the closing costs so they don’t realize the costs are comparable. However, reverse mortgage closing fees are comparable to the traditional closing costs of a conventional loan including an origination fee, appraisal, title fees, title insurance and recording fees. As a Federal Housing Administration (FHA) insured loan, with the HECM borrowers also pay the FHA Mortgage Insurance Premium (MIP).

The FHA MIP offer significant benefits for reverse mortgage lenders, investors, as well as the borrowers.

The insurance protects the investors against risk and loss.

There are also advantages and increased borrowing power for the borrowers with FHA insuring the reverse mortgage. These include:

Guaranteeing the funds are available for you, the borrower, during the term of the loan. With HELOCs the bank/lender can call the loan due and payable if there are changes with the bank, for example they merge with another bank/lender or they close their doors. Insured by HUD, HECMs are still available even if something happens to the lender.
Guaranteeing the reverse mortgage lender against default or shortfalls means the interest rates are lower compared to other mortgages for the benefits one receives with the reverse mortgage. i.e.,
- With conventional loans the interest is impacted by one’s credit score. With the reverse mortgage one’s credit, even if it’s poor, does not impact the interest rate.
- The FHA insurance on the HECM loans keep the interest rate low and allows more dollars to be loaned than with proprietary programs. Proprietary reverse mortgage programs have a higher interest rate to cover the lender’s and investor’s risks and loss.
Providing a line of credit growth rate (available only with reverse mortgages). The tenure monthly payment option also has a growth rate factored in when the tenure payment is calculated.
As a reverse mortgage it is a non-recourse (no personal liability) loan. What this means is if the loan balance on the reverse mortgage is higher than what the fair market value is on the home when the loan is due and payable, the FHA MIP will cover the difference to the lender rather than the borrowers or their heirs having to come up with the difference.

When the loan becomes due and payable, generally when the borrowers pass away, sell or move, the repayment amount is the lesser of the loan balance or fair market value of the home. If there is remaining equity, it goes to the borrowers or their heirs. As a non-recourse loan there is no personal liability to the borrowers or their estate for repayment. If an heir wants to keep the home, they can do so by paying off the reverse mortgage loan balance.

Lee who had some credit card debt, and while still working and having some retirement accounts he needed improved cash flow and didn’t want to tap the retirement accounts. Doing the reverse mortgage allowed him to access cash to pay his credit card debt and do some home improvements. It also meant he didn’t have to pull funds from his retirement accounts, but leave those for the future, maybe even being able to leave his heirs some funds. And with the reverse mortgage line of credit, when he does retire, he’ll still have some funds available to replace his income.

Sometimes there are situations that pose puzzles during the process that I face in order to be able to do the loan for borrowers. Through my experience and knowledge of the product and industry along with my problem solving skills, I work hard to solve the puzzle and will do so if at all possible.

Another puzzle we helped solve was for Marilyn. During the probate of her mother’s estate, Marilyn wanted to keep the family home. Sorting through the process of the probate and transferring the home’s title to Marilyn, the reverse mortgage provided the funds to pay her siblings their shares of the estate so she could keep the home and live there as her primary residence.

Reverse Mortgage Puzzle Solved If you’d like to improve your retirement cash flow now or for the future and want to solve the reverse mortgage puzzle, contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.

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.

Meet our HECM Reverse Mortgage Borrowers

Posted on April 1, 2017 by Beth Paterson, CRMP

Couple benefits from eliminating monthly mortgage payments There are numerous ways homeowners use their Home Equity Conversion Mortgage (HECM) proceeds. Meet our borrowers. . .

Eliminate Mortgage Payments: Lisa and George** had a small mortgage remaining on their home. It was difficult to make the monthly payments so they did a Reverse Mortgage to eliminate the payments. There was a balance that they left in a Line of credit for future use.
(Borrowers are still responsible for paying property taxes, insurance, HOA Dues & maintaining home.)

Maintain Lifestyle: Helen and Harold did a Reverse Mortgage to afford to take their annual trip to Florida during the winter months. They are thankful they are able to maintain their lifestyle.

Prepare for Emergency: Earl and Ruth did a Reverse Mortgage to be prepared for an emergency if something were to happen to one of them.

Protect Other Investments: To have extra spending money without having to cash out their CDs or other investments, Jerry and Carol decided to do a Reverse Mortgage.

Supplement Retirement Income: Dale and Kevin were two brothers who lived in the home where they were raised. Being both were over 62 and owners of the property, they were able to do the Reverse Mortgage to supplement their retirement income.

Eliminate Mortgage Payments*, Home Upgrades and Line of Credit: Dee and Peter did a reverse mortgage to eliminate their current mortgage payment*, take a lump sum for some home upgrades, receive an extra $300 a month in monthly payments to supplement their Social Security, and still have funds in a line of credit for future use.

Purchase a Car: Bart and Tina wanted to purchase a new car but didn’t have much in the way of savings. With a Reverse Mortgage they were able to purchase a car.

Purchase Hearing Aide and Home Repairs: Joe needed a hearing aide but couldn’t afford it with his Social Security benefits. Rather than taking money from his savings, he did a Reverse Mortgage. He also used some of the money to put new siding on his home.

Pay Family Caregivers: Sam and Frances were both in frail health. Two of their daughters decided to care for their parents rather than hire outside services. Since they had quit their jobs and it was affecting their family’s financial situation, Sam and Frances decided to do the Reverse Mortgage and use the funds to pay their daughters for the care they were providing.

Traveling: Helen was struggling to meet her living expenses with just her Social Security Benefits. She also had always dreamed of traveling. The Reverse Mortgage provided the extra cash she needed and she was able to fulfill her dreams of traveling.

Not Rely on Children: Nancy had accrued some debt including some credit cards and borrowing from her children. She did a Reverse Mortgage to pay off those debts and to have a line of credit available for future needs. She also enjoyed having some extra cash to purchase some things to fix up her home and to go to lunch with friends on occasion. Because her children had their own expenses and needs, they were relieved that their mother had done the Reverse Mortgage and could live more comfortably without relying on them.

Home Repairs: Elaine needed some repairs done to her home. They were more than she could afford on her limited income. She did the Reverse Mortgage to pay for the repairs and to have extra funds for supplementing her income.

Home Health Care to Stay In Home: Robert did not want to go to a nursing home, yet he needed long term care. George, Robert’s son, decided they should do a Reverse Mortgage to pay for the home health care needed to keep Robert at home where he had raised his children. Robert is happy because he is living where he chooses. George is happy the family can fulfill Robert’s wishes of staying in his home and still receive the needed care.

Pay Property Taxes: Dorothy was behind on her property taxes and facing losing her home to the county. She did the Reverse Mortgage, paying off her back taxes and setting up a Life Expectancy Set Aside (LESA) to pay her future property taxes and insurance. She was able to live more comfortably, not depending on her children to assist her.

Pay debts and Have Funds for Future: Bill and Phyllis were preparing for the future. They did the Reverse Mortgage to pay off their current mortgage*, the credit card debts, and to have money in their line of credit. With the money in the line of credit when one of them passes away, the other would be able to change the payment plan to receive monthly payments and continue to live the lifestyle they are currently accustomed to, even without the Social Security of their spouse.

Funds for Everyday Living Expenses: Phil became a “new man” since the Reverse Mortgage was done. He now goes out to eat with his friends and works in his yard.

Every Day Living Expenses: Frank and Emma, a vibrant 90 and 86 year old couple, found that each month they were short money to even buy milk. Their son-in-law and daughter assisted them in obtaining the Reverse Mortgage. They are so pleased that they now can live more comfortably. They used the proceeds to receive monthly payments to supplement their Social Security. They also took out a lump sum to fix up their home and left enough in their line of credit to use as future needs arise.

Payback Family Loan: Prior to learning about reverse mortgages, when Mabel couldn’t afford her mortgage payments she borrowed money from her son. When her son needed the money back, once she learned about reverse mortgages she was able to repay him. With her son paid off, and with no monthly mortgage payments* she was greatly relieved, felt less financial pressure, and had peace of mind knowing she didn’t owe him money and could remain independent. During the reverse mortgage process she consulted an elder law attorney. As a result she now has a will, power of attorney, and her health care directives in place. HECM provides funds for home care

Home Health Care: A reverse mortgage allowed Margaret, who had just been released from the rehab center and needed a home health care aide to assist her, have the funds for the care so she could remain in her home.

Purchase a New Home: Mike and Carol decided they needed a 1 level home to fit their changing health needs, they used the Home Equity Conversion Mortgage HECM for Purchase to purchase their new home instead of using conventional financing.

Wouldn’t you like to sit back and relax with
Security, Independence, Dignity and Control?

Contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.

When you decide to do a reverse mortgage make sure you work with a local originator or loan officer who specializes in reverse mortgages, has years of experience and knowledge in reverse mortgages in your state, preferably holds the Certified Reverse mortgage Professional (CRMP) designation, licensed in your state, is a broker, working with various lenders, and is willing to meet with you to review the details, before the application, during the application and at closing.

I would caution about working with an originator from another state who is mailing all the documentation, including the application and not “meeting” with you to explain and review what you are signing. (The lenders in another state may send a notary for application and/or closing – they are not licensed mortgage brokers so can NOT answer questions, they are there only to verify your signature.) Ask for references and find out if the loan originator will be there for you even after the loan has closed. If you feel pressured, call another originator. You can find a list of questions to ask an originator at our webite: www.RMSIDAC.com.

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

*Borrowers are still responsible for paying property taxes, insurance, HOA Dues & maintaining home.

**Borrowers’ situations are real; borrowers’ names changed to protect their identity.

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 Homeowners Benefit from Reverse Mortgages

Posted on March 11, 2017 by Beth Paterson, CRMP

Senior Homeowners Benefit From Reverse Mortgages Are you looking for some funds to supplement your retirement? Do you need to modify your home to meet your needs? Are you looking for a way to pay for the home health care you need now or may need in the future? Do you have a mortgage and find making the payments is a struggle? Or maybe you want to continue making your trip south during the winter but funds are short to do so. Are you considering downsizing to move closer to family or want to have a home more suitable to your current lifestyle?

A Home Equity Conversion Mortgage (HECM) reverse mortgage may be your answer. A reverse mortgage is a home equity loan with special terms for senior homeowners 62 and older. Similar to a conventional loan, you continue to own the home.

With the flexibility of making payments toward the loan balance, or NOT making a mortgage payment at all, the HECM reverse mortgage could provide the cash for your immediate needs or future needs. (Borrowers are still responsible for paying property taxes, hazard insurance and maintenance of the home.)

It also offers more flexibility on how you can receive the funds including monthly payments, line of credit, lump sum or a combination of these versus a lump sum with a conventional mortgage.

An additional benefit is funds left in the line of credit grow so more funds become available over time…a great advantage over a HELOC and a great tool for long-term care planning.

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

Eliminate Mortgage Payments, Home Upgrades and Line of Credit: Dee and Peter did a reverse mortgage to eliminate their current mortgage payment, take a lump sum for some home upgrades, receive an extra $300 a month in monthly payments to supplement their Social Security, and still have funds in a line of credit for future use.

Maintain Lifestyle: Helen and Harold did a reverse mortgage to afford to take their annual trip to Florida during the winter months. They are thankful they are able to maintain their lifestyle.

Not Rely on Children: Nancy had accrued some debt including some credit cards and borrowing from her children. She did a reverse mortgage to pay off those debts and to have a line of credit available for her future needs. She also enjoyed having some extra cash to purchase some things to fix up her home and to go to lunch with friends on occasion. Because her children had their own expenses and needs, they were relieved that their mother had done the reverse mortgage and could live more comfortably without relying on them.

Protect Other Investments: To have extra spending money without having to cash out their CDs or other investments, Jerry and Carol decided to do a reverse mortgage. Providing them more freedom and control of their life during retirement.

Line of Credit for future needs: Janice did the reverse mortgage just for the purpose of having a line of credit to draw on in the future when needs arise. Because the funds in the line of credit grow more funds become available in the future. With the line of credit available to her when she needs car repairs, or even a new car, or to cover medical expenses or long term care needs she will have funds in her line of credit to cover these needs.

Purchase a New Home: Mike and Carol wanted to purchase a new home that fit their needs of a one-level so they used the reverse mortgage rather than a conventional mortgage to finance their new home. This meant they didn’t have monthly mortgage payments to make and provides them a better cash flow during their retirement years.

The loan becomes due and payable when the home is no longer the primary residence of the borrowers or on their 150th birthday. Another difference and benefit of the reverse mortgage over a traditional mortgage is that the reverse mortgages are non-recourse loans. This means there is no personal liability if the loan balance is higher than what the home can be sold, it is paid only from the fair market value of the home. If the home is sold for more than the loan balance then the borrower(s) or their heirs keep the difference.

As with any mortgage loan there are closing costs. The closing costs of the reverse mortgage are comparable to a conventional mortgage. They include the origination fee, appraisal, title and settlement and recording fees. With the FHA HECM reverse mortgage HUD’s regulations state that only the actual cost may be charged to the borrower, they do not allow mark ups such as processing fees.

As a FHA loan the fees include the FHA Mortgage Insurance Premium – this would be the same if they are doing a Forward FHA loan. When comparing closing costs side by side to a conventional loan the difference is the up-front FHA Mortgage Insurance Premium. The benefits of FHA insuring the loan include guaranteed funds, a lower interest and the loan being non-recourse as well as regulating the fees. “Surprise! Reverse Mortgage Closing Costs Actually Compare to Conventional Mortgage Costs” provides a side-by-side comparison.

When considering whether to do a conventional mortgage, a HELOC or a reverse mortgage you must consider if you can even qualify for a conventional mortgage or HELOC; then if you or your spouse can make the payments over time. For example, what happens if “life happens,” could you continue making those payments? Would you be stressed trying to pay living expenses, medical bills, or would you be facing foreclosure? Or could you qualify for the reverse mortgage and have enough funds to pay off your current mortgage?

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

Meet Reverse Mortgage Originator in person For further details on the reverse mortgage contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.

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.

Refinancing A Reverse Mortgage – Should you?

Posted on January 10, 2017 by Beth Paterson, CRMP

Current reverse mortgage borrowers are receiving letters encouraging them to refinance. While refinancing a reverse mortgage is an option, let’s explore whether it should be considered.

Just like refinancing a conventional, or what we call a forward, mortgage, borrowers consider refinancing a reverse mortgage when they need more money. But just like a forward mortgage, one needs to make sure they are going to receive a benefit when they refinance. And just like a forward mortgage, when refinancing the closing costs are part of the transaction.

When I receive the calls from my borrowers who have received the letters or encouragement on their statements I start with these questions:

How long ago did you take out your reverse mortgage?
What was the value of your home at that time?
What is the value of your home now?
What is your current loan balance on your reverse mortgage?
Are you receiving monthly payments?
Do you have funds in a Line of Credit?
Why would you want to refinancing?

These questions are pertinent in helping one decide if it makes sense to consider refinancing.

Keep in mind the factors used to determine the amount a senior can receive from their reverse mortgage include: the interest rate of the program chosen, the age of the borrower (the older one is the more funds one can receive), and the home value based on an FHA appraisal or the FHA Lending Limit.

The first three questions are important in determining if you will be able receive more money when refinancing. As one aged during the time home vales were increasing refinancing made more sense because borrowers were more likely to be able to receive additional funds.

As you know, during the housing crash home values decreased. Now while home values have started to increase, we often find that the borrowers will still not receive additional funds from refinancing their reverse mortgage. (However some states the values have increased faster and higher than others. In MN, while increasing, the values have not increased enough to warrant refinancing in many situations.)

If, however, the initial reverse mortgage was taken when there was a lower lending limit, i.e. $251,750 and the current home value is, say $400,000, then refinancing may be considered.

For many years the FHA Lending Limit was based on the county in which one lived. In 2008 the Lending Limit was changed to a national limit of $417,000. In 2009 and through the end of 2016, the national limit was $625,500. January 1st through December 31, 2017 the FHA Lending Limit for reverse mortgages has been increased to $636,150.

Is refinancing a good idea just because the Lending Limit has increased? Not necessarily, especially if one’s home value isn’t in the higher valued range.

The current loan balance is important because when refinancing the reverse mortgage, the current reverse mortgage needs to be repaid. If there aren’t enough proceeds to pay off the current mortgage and to receive additional money then refinancing doesn’t make sense.

The next two questions, whether they are receiving monthly payments or have funds in a line of credit, are important because most likely it doesn’t make sense to refinance a reverse mortgage if they still have funds available to them that will last them for a few more years.

With a forward mortgage sometimes refinancing is done to reduce the interest rate. With the reverse mortgage generally it doesn’t make sense to refinance for the interest rate. Remember one isn’t making payments with a reverse mortgage so the interest rate doesn’t impact their monthly cash flow, it only impacts the amount that will be repaid when the loan becomes due and payable.

It is important to note that the reverse mortgage is non-recourse which means there is no personal liability to the borrower or their heirs if the loan balance is higher than what the home can be sold for.

The funds available to borrowers are determined by the age of the youngest borrower, the Expected Interest Rate and the program chosen. If the Expected Interest Rate is higher, less funds will be available.

Until 2008 all reverse mortgages were adjustable rate mortgages. Don’t panic, this isn’t a bad thing with a reverse mortgage. With the adjustable rate reverse mortgage there is more flexibility by having the option of a line of credit, monthly payments, a lump sum or a combination of these.

The adjustable interest rate is made up of an index and a margin. The index is based on the LIBOR and the margin is determined by the lender. HUD set a floor at 5.06% which means the funds available will be the same if the interest is at 5.06 or below. Currently the interest rates are remaining low, below the floor so one generally will not receive more funds if they were to refinance.

In 2008 a fixed rate option was introduced. With the fixed rate one has to draw all funds as a lump sum; the line of credit and monthly payment options are not available. One is not going to gain a benefit of more funds available by refinancing for a lower interest rate. However we have had some who refinance from a fixed rate to an adjustable rate to receive the flexibility the adjustable rate option offers, especially if one chooses to make payments on their reverse mortgage.

When refinancing one will still have closing costs so you have to consider if refinancing will offset off set a lower interest rate and/or funds one is receiving.

The Streamline Refinance of the FHA Housing and Urban Development (HUD) Home Equity Conversion Mortgage or HECM reverse mortgage requires a calculation demonstrating borrowers receive at least 5% more or they must go through the counseling session to review their situation. Some lenders require the counseling for any borrower refinancing their reverse mortgage. This is a strong protection to help borrowers from falling for a lender’s marketing letters and thinking refinancing may be a good idea when it really isn’t. Unfortunately it can cost seniors to find out this information as counselors are allowed to charge, generally $125 for the counseling session.

The National Reverse Mortgage Lenders Association (NRMLA) ethics committee set a guideline that reverse mortgage borrowers who want to refinance must wait a minimum of 18 months along with the “closing cost test” and “loan proceeds test.”

The last question or why you are considering is important in the decision to refinance because there could be valid reasons to refinance that benefit you. Some include a title change, i.e. adding a younger spouse to title when they turn 62, taking on a new spouse are a couple reasons.

While options should always be considered, after reviewing the above questions and your answers, at this time refinancing generally doesn’t make sense for the majority of reverse mortgage borrowers. Hopefully seniors don’t get sucked in with marketing letters & statements by completing an application so that the lender can just take an application when refinancing doesn’t make sense for them.

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-1q4

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.

Believe It Or Not, Reverse Mortgages Are NOT A Scam!

Posted on December 5, 2016 by Beth Paterson, CRMP

Comments under factual articles in the media, “warnings” to those interested in exploring a reverse mortgage, and even research says people are afraid of reverse mortgages because they think they are a scam.

Most people have, or had, a conventional mortgage using them to purchase their home or have refinanced their original purchase mortgage…these aren’t considered a scam. So why are reverse mortgages considered a scam?

A reverse mortgage is a loan to a homeowner using the home as collateral or security where the lender puts a lien against the property, just like conventional mortgage, but with special terms for those 62 and older.

The Home Equity Conversion Mortgage or HECM, the most common reverse mortgage, is insured by FHA for the purpose of providing a valuable financing alternative for senior homeowners to help them remain in their home and have access to funds by withdrawing a portion of their home equity.

Whether a conventional mortgage or a reverse mortgage, borrowers are responsible on how they use the funds from their loan. If not used wisely, with a conventional mortgage the borrower is said to be irresponsible; with a reverse mortgage it is said the lender took advantage of the borrower and it’s a scam. Why? It is the borrower who is making the choices.

Let’s compare the two.

	Reverse Mortgage	Conventional Mortgage
Loan Collateral	It is a loan using the home as collateral.	It is a loan using the home as collateral.
Title/Ownership	The title stays in the borrower’s name, they remain the homeowner.	The title stays in the borrower’s name, they remain the homeowner.
Interest Rate	Income or credit scores don’t affect the interest rate.	Interest rate can be impacted by one’s income and credit score. Limited income and poor credit means a higher interest rate.
Qualifying	One homeowner needs to be 62 or over. Income and credit history are used to for qualifying; to determine if borrowers meet HUD’s Financial Assessment requirements. If one has a history of late payments on debt and a low residual income, a Life Expectancy Set Aside may be necessary. Under some circumstances they may not qualify. These requirements are lower and less strict than a traditional loan.	Income and credit history and scores are used to for qualifying; low income and/or a poor credit may mean one doesn’t qualify for the conventional mortgage.

Closing Costs

Closing costs generally include origination fee, appraisal, title and recording fees. Closing costs could be offset by lender or broker credits but will likely have a higher interest rate.

FHA Mortgage Insurance Premiums are charged.

Closing costs are comparable to reverse mortgages…side-by-side comparisons have been done.

Closing costs generally include origination fee, appraisal, title and recording fees. Closing costs could be offset by lender or broker credits but will likely have a higher interest rate.

If doing a “Forward” FHA Mortgage Insurance Premiums are charged. On conventional mortgage one may be required to pay for Mortgage Insurance.

Closing costs are comparable to reverse mortgages…side-by-side comparisons have been done.

Loan Amount Borrowed

Initial amount borrowed is based on the age of the youngest homeowner, appraised value or FHA Lending Limit, expected interest rate and program chosen.

Over time the amount borrowed increases with the interest amount charged, FHA Mortgage Insurance Premium and draws being added to the loan balance. At some point the amount borrowed could be more than the value of the home at the time the loan was initiated.

If payments are made (they are optional), then they could decrease the loan balance.

Amount borrowed is based on appraised value of home, credit score, income, debts, and program chosen.

Receipt of Funds

Can receive funds as a line of credit, monthly payments to the borrower, lump sum or a combination of these.

Line of credit increases monthly so more funds become available over time. The available line of credit can never be withdrawn by the lender if borrower is abiding by the terms of the loan.

Conventional mortgage funds are drawn as a lump sum.

Home Equity Line of Credit (HELOC) creates a line of credit for a specific term and specific amount. The line of credit does not increase and the lender can withdraw the loan at any time.

Use of Funds

Borrowers benefit by having access to funds for whatever they need or want. It can be used for more immediate needs or as a financial planning tool or even to purchase a home.

Borrowers purchase a home or refinance to have funds for what they need or want.

Monthly Mortgage Payments

The advantage is monthly mortgage payments are not required make which takes away the risk of foreclosure from not making a monthly mortgage payment.

With a conventional mortgage or HELOC one has to make monthly mortgage payments. If the mortgage payments aren’t made, usually within 3 to 4 months, the foreclosure process will begin.

Payment Requirements

While monthly mortgage payments are not required, they can be made; it’s a choice of the borrower as to when, how much, how often, or not at all. Making payments reduces the loan balance.

With the adjustable rate, the funds are applied to the line of credit and can be re-borrowed without refinancing.

Payments are required to be made.

One has to refinance to access more funds.

Interest

Interest is accrued over the life of the loan. This increases the loan balance over the term of the loan.

If one chooses to make payments the loan balance will be decreased by the amount of payment(s) made.

Interest is paid each month along with the principal generally reducing the loan balance over the term of the loan.

If one has a balloon payment the full payment would be required at the end of the loan term…generally 10 to 15 years.

Borrower’s Responsibilities

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.

If they don’t abide by the terms of the loan, they risk a foreclosure.

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.

If they don’t abide by the terms of the loan, they risk a foreclosure.

Loan Term/Due Date

It is a loan and does need to be repaid at the end of the loan term. The reverse mortgage loan is not due and payable until the home is no longer the primary residence of the borrower. (Or if they don’t abide by the terms of the loan.) The due date on the mortgage is the 150th birthday of the youngest borrower.

It is a loan and does need to be repaid over the life of the loan. A conventional mortgage loan term has a due date generally in 15 or 30 years from the closing date. A HELOC’s loan term has a due date generally in 10 to 15 years from the closing date.

Equity Difference When Sold

When the loan is being repaid, if the home is sold for more than the loan balance, the borrower or their heirs receive the difference.

Non-Recourse

All reverse mortgages are non-recourse which means there is no personal liability to the borrower or their heirs. The loan is paid back only from the property.

Conventional loans can be non-recourse, it’s determined by the lender. Without the non-recourse factor the lender can be repaid from other assets of the borrower.

FHA Mortgage Insurance Premium Covers When Loan Due

If the loan balance is higher than what the home can be sold for when the loan is due, the FHA Mortgage Insurance covers the difference to the lender; the borrower or their heirs or tax dollars don’t cover this difference.

Staying in home when all funds used

Once a reverse mortgage is in place, even if one draws all the funds available from the reverse mortgage, the borrowers can stay in their home as long as they abide by the terms of the loan, i.e. pay property taxes and insurance, HOA dues if applicable, and maintain the home.

Borrowers stay in their homes even when all funds are drawn as long as they abide by the terms of the loan.

Protections

Requires counseling by a HUD approved 3^rd party counselor as a protection to help borrowers understand the details of the reverse mortgage. The processing cannot start until the counseling has occurred.

HUD regulates what lenders and third-parties may charge stating they must be customary and reasonable costs necessary to close the mortgage. Mark-ups are not allowed.

Disclosures and sample closing documents must be provided to borrowers at application.

No counseling required.

Mark-ups on such items as processing and underwriting fees and courier fees can be charged.

Lender/Bank and Investor Benefit

Lender makes money by the interest charged on the loan.

Would you loan money without receiving a benefit or compensation?

Lender makes money by the interest charged on the loan.

Would you loan money without receiving a benefit or compensation?

Use a reverse mortgage to stay in home As you can see, reverse mortgages compare to conventional mortgages and they are NOT a scam. As with any financial product, or any purchase for that matter, one should get the facts and understand the terms of what they are purchasing.

The loan officer one is working with should be explaining the features and terms of the reverse mortgage. Yes, unfortunately there are bad apples in every industry but that doesn’t mean the product is bad. The reverse mortgage industry has implemented protections to prevent borrowers from scam.

Don’t jump to conclusions! Understanding them, one might find the reverse mortgage is a viable option for their situation.

Blog posts’ information is current as of date post published, program is subject to change 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.

Want Independence? Explore A Reverse Mortgage.

Posted on July 1, 2016 by Beth Paterson, CRMP

Celebrating Our Independence - Finding Independence With A Reverse Mortgage 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. Being able to plan and have funds for the future and long-term care needs as well as protecting other assets and/or delaying taking out Social Security are other ways to have independence.

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.”

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 for whatever they need or want. 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. (Borrowers are still responsible for paying their property taxes and hazard insurance and maintaining the home.)

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 at fair market value 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!

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

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

Minnesota Reverse Mortgages SIDAC

Minnesota Reverse Mortgage Information, Facts and News from the Experts Excelling in Service

Tag Archives: Senior Stories

Reasons to obtain a Reverse Mortgage

Reverse mortgage documents are a way to sign your own declaration of independence

Home for the Holidays…Creating A Wonderful Life for your Older Loved Ones

Solving The Reverse Mortgage Puzzle For You

Meet our HECM Reverse Mortgage Borrowers

Senior Homeowners Benefit from Reverse Mortgages

Refinancing A Reverse Mortgage – Should you?

Believe It Or Not, Reverse Mortgages Are NOT A Scam!

Want Independence? Explore A Reverse Mortgage.