Need Home Modifications To Age In Place? A Reverse Mortgage May Help

Posted on September 12, 2010 by Beth Paterson, CRMP

Most seniors want to stay in their homes and remain independent yet often believe they can’t for a number of reasons. Making some home modifications could make their wish of remaining in their home a reality by providing a safer more comfortable environment.

More than one third of those age 65 and older suffer injuries from a fall each year according to research from the National Center for Injury Control and Prevention. AARP research suggests the leading cause of injury and deaths among seniors is falls. Modifying one’s home can help to eliminate common hazards and help to improve the quality of living in one’s home. Improving the safety of one’s home can help one have more comfort, convenience, and remain independent and active in their community. Some people have mobility limitations from causes other than falls and still want to stay in their home. This too can be accomplished with some home modifications.

Bathing, toileting, cooking, and climbing stairs can be made easier to perform by adapting one’s home. Modifying one’s home can be as simple as installing grab bars in the bathrooms, removing throw rugs, moving electrical cords from hazardous locations, touch buttons for turning lights on and off to installing entrances to accommodate wheel chairs and lifts to access another level.

By assessing and modifying one’s home, one can live more safely, comfortably and remain independent. But how can one afford this? A reverse mortgage may be the solution beyond what Medicare or insurance will pay for.

A reverse mortgage is a special loan to allow seniors to remain in their home with security, independence, dignity, and control by converting the equity into cash. Similar to a conventional loan where a lien is placed on the home yet the borrower retains ownership. The reverse mortgage is different from a conventional loan with no income or credit scores required and no monthly mortgage payment requirements.

The reverse mortgage loan amount is based on the age of the borrower, their home value and an Expected Interest Rate. Due and payable when the home is no longer the primary residence, usually when they move, die or sell, a reverse mortgage can allow one to remain in their home and use the equity now. As a non-recourse loan there is no personal liability to the borrower or their estate as long as they are not retaining ownership. If the home is sold for more than the loan balance then the borrower(s) or their heirs keep the difference.

Bob, a Minnesota senior who had lost his wife wanted to stay in his home. He did the reverse mortgage and with a portion of his proceeds he modified his home to be prepared for the future such as having the doorways wider to accommodate a wheel chair and grab bars installed. He’s thrilled that he was able to have his home modified and will be able to remain there for years to come.

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-ob

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.

Can’t Afford To Retire? Maybe There’s An Answer!

Posted on August 16, 2010 by Beth Paterson, CRMP

With mortgage payments due, retirement funds decreased or decreasing it is harder for seniors to retire. However, there may be the option to retirement.

Working a 40 hour week at a very physically demanding job, Len continued to work in order to cover their mortgage payments. After hearing about a reverse mortgage, they contacted me, got educated with the facts and decided to proceed. Once their reverse mortgage was closed and their conventional mortgage paid off, eliminating mortgage payments Len was able to retire. With no mortgage payments, he and his wife, Maricarol are now enjoying their retirement, living in their Minnesota retirement home close to their children giving them the opportunity to spend more time with their children and grandchildren. They said, “Without the reverse mortgage Len would not have been able to retire.”

Trying to make ends meet and make his mortgage payments, Jack is still working. Having completed his Home Equity Conversion Mortgage (HECM) application, he is anxious to get to the date of his closing so his mortgage will be paid off with the reverse mortgage and his cash flow improved.

A mortgage with special terms for seniors, a reverse mortgage allows those 62 and over to keep the title, remain in their home with no income or credit score qualifications, no monthly mortgage payments, and a due date when the home is no longer their primary residence or their 150th birthday. (A jumbo reverse mortgage does have a credit score qualification, however.) Considered a lien against the property the IRS generally does not consider the reverse mortgage loan advances to be taxable income.

Offering more flexibility, the reverse mortgage proceeds can be received in monthly payments (for life or structured to borrowers needs), line of credit (with a growth rate), lump sum or a combination of these.

The loan amount is determined by the home value, age of the borrower (the older one is the more they can access), interest rate and program chosen. The fixed rate option requires all proceeds to be drawn as a lump sum, the adjustable rate allows the flexibility of the funds to be received in monthly payments or a line of credit. One’s circumstances will help decide which program is best for their situation.

At 79, Mike was still working to supplement his Social Security income. Then he injured his knee and couldn’t work any more. Without his work income he couldn’t afford to cover his living expense, which included a $700 mortgage payment, let alone his additional medical expenses.

Mike did a reverse mortgage and with his proceeds, his conventional loan was paid off as well as some other bills. He now has a better cash flow because he doesn’t have to make any mortgage payments. And having chosen the monthly payment option, and he is receiving monthly payments to replace his working salary.

He’s very relieved that he doesn’t have to worry about where the money is going to come from to make his mortgage payment or maintain his lifestyle. Even with his knee healed he doesn’t have the need to work and he doesn’t have to worry about losing his home if he couldn’t make a mortgage payment. He now has security, independence, dignity, and control during his retirement.

If you know someone 62 and older thinking they can’t afford to retire, have them explore a reverse mortgage. Being educated with the facts the reverse mortgage may well be their answer to retiring.

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-nn

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 Equal Independence For Seniors

Posted on July 2, 2010 by Beth Paterson, CRMP

As we look to celebrating the independence of our county let’s also look at how our seniors can celebrate their own independence. Defined as “sufficient income for comfortable self-support; a competence” at dictionary.com, independence is important to seniors.

When we talk with our clients we hear they want to be able to enjoy their retirement and maintain their lifestyle which includes having their independence. So how can they do this if they are living off their Social Security and if they have retirement investments but they have dropped in value?

Even though as one ages some help may be needed, they can still maintain their independence. A reverse mortgage can help provide this independence. After Edna did her reverse mortgage she said, “Now I have my dignity back and my independence.”

Some instances where the reverse mortgage can help one remain independent include having 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 they desire.

Or if one needs more help to remain in their home they would have the funds to pay for the assistance from a home care agency to do so. While some additional assistance may be needed seniors can still have a sense of independence if they have the funds to get the additional help and choose the agency they wish.

Seniors have sometimes used their credit cards to fund their lifestyle or pay their bills, others have used a conventional home equity mortgage or a line of credit. And others look for additional cash by applying for a conventional home equity mortgage but don’t qualify.

The reverse mortgage can benefit here too. Interest rates on credit cards are high. Having the reverse mortgage can reduce their dependence on their credit cards. They usually don’t qualify for a conventional mortgage with today’s lending requirements especially since their only income is Social Security. Even if they do qualify or currently have a home equity mortgage or line of credit, they have to make payments which can be difficult on a fixed income or when “life happens.”

Another Minnesota reverse mortgage borrower 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.”

A reverse mortgage is a mortgage with special terms for senior home owners 62 and older to allow them to remain in their home. The loan amount is determined by the appraised home value (or FHA lending limit), the age of the borrower, and an Expected Interest Rate. Let’s review the facts of reverse mortgages:

The title stays in the borrower’s name same as with any mortgage. The borrower owns the home, no one else does.
Income and credit scores are not required for the HUD insured Home Equity Conversion Mortgage or HECM, the most common reverse mortgage.
The borrower may be able to stay in their home as long as it’s their primary residence or until their 150^th birthday.
Lower interest rates than other loans – historically the reverse mortgage interest rates have been lower than conventional loans, lines of credit and credit cards.
A borrower won’t lose their home because they can’t make a mortgage payment – they don’t have to make monthly payments. They are however, as with any loan, responsible for taxes, insurance and maintaining the property and abiding by the terms of the loan agreement.
The reverse mortgage funds are generally considered tax-free (although if proceeds are used for certain purposes taxes may apply – consult with a tax advisor).
The proceeds are not considered income so Social Security and Medicare are not impacted and one may still be able to receive Medicaid.
The HECM is government insured and guaranteed to be available for borrowers.
Allows access to more funds without paying additional closing costs – there is a growth rate with the line of credit and monthly payment options with the adjustable interest rate program.
There are no out of pocket costs other than the cost of the appraisal.
There are no prepayment penalties.
Borrowers or their heirs get to keep any remaining equity after the loan is paid off.
The loan is non-recourse which means there is no personal liability to the borrower or their estate as long as they are retaining ownership.

Paying off a mortgage on her home, Judy stated, “I truly believe in reverse mortgages, especially for someone like me with a limited income. I received enough from the reverse mortgage to pay off some other bills and still had a little to put into a “line of credit” account. Some of the bills I am paying are credit card debts which have a very high interest rate. It’s a good feeling to be able to do that. It makes bill paying each month less stressful.” Now this is senior independence.

Have a wonderful time celebrating the independence we have in this wonderful country of ours. And keep in mind that a reverse mortgage equals independence for seniors.

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

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

Fast Forward To August… Seniors Would Have Lost Their Home To Foreclosure Under New Minnesota Reverse Mortgage Law

Posted on June 22, 2010 by Beth Paterson, CRMP

A couple days ago I shared the story of how the reverse mortgage was used to save Ken and Mary’s home from foreclosure. While we were able to make this happen now in just the 3 weeks we had, if we had received the call from Ken and Mary after August 1, 2010 when the new Minnesota reverse mortgage law is in affect, the ending would be different.

Because of the new 7-day “cooling off” period requirement, Ken and Mary would have lost their home. Why? Because the new law requires that borrowers receive and sign a commitment and then wait 7 days before the loan can be closed. This is in addition to the 3-day federal required rescission.

Let’s look at the timing. The loan was underwritten and cleared on a Friday, just 5 days before the payment was needed to be in the sheriff’s office. This, from my understanding is when the commitment would be issued. So if the commitment was issued on a Friday, the borrowers would need to receive the commitment, sign it and return it. Even if this was able to be implemented on Friday, the borrowers would need to wait 7 days before the closing could take place. (I’m assuming actual days, not excluding Sundays and Holidays as the 3-day rescission period does – this has yet to be defined.)

The 7th day would be the following Friday, already 2 days past the redemption date. Then we have the 3-day rescission period, Saturday, Monday, Tuesday. Funding would take place on the next Wednesday. This would have been 7 days after the redemption period. Seven days too late!

An additional risk of delay as a result of the new law could be the counseling. Currently reverse mortgage borrowers can receive counseling from HUD-approved counselors in the state or from a list of national counselors.

The new Minnesota law requires the reverse mortgage borrowers only receive counseling from HUD-approved counselors located in the state. Because there are only 7 counseling agencies in the state of Minnesota, with all borrowers needing to receive the counseling from these 7 agencies, borrowers could face a longer wait time to receive their counseling. Even now scheduling times with a counselor can be 2 to 3 weeks out. While they make some exceptions if one is in foreclosure, there could still be a longer wait to receive the counseling, not necessarily the next day as Ken and Mary were able to receive now.

Being processing of a reverse mortgage cannot start until after borrowers have received and signed the counseling certificate, the longer time frame could also mean the seniors losing their home.

The law makers, in an effort to “protect” seniors, will be causing some seniors to lose their home to foreclosure. Interesting enough the reverse mortgage bill was added as an amendment to the foreclosure bill.

I’m glad we were able to help Ken and Mary save their home. It’s going to be a sad day come August 1st when we have to tell the “Ken’s and Mary’s” who call us and say we have 3 weeks to redeem our home from foreclosure, “Sorry, we can’t take your application, process, close and fund the loan in that time frame because there is a new law that says you have to find a counselor in Minnesota that can do your counseling tomorrow and then after the file is underwritten and ready to close you have to have a 7-day cooling off period in addition to a 3-day rescission period.” This will break my heart.

In my opinion, one senior losing their home because of the new law and an extra unnecessary “cooling off” period is one too many!

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.

At The Eleventh Hour… Reverse Mortgage Used To Save MN Senior’s Home

Posted on June 20, 2010 by Beth Paterson, CRMP

The call came it at 5:00 p.m. on a Wednesday afternoon, “We’re in foreclosure, the redemption period ends in three weeks. We need a reverse mortgage.” Ken and Mary, in their 60’s, were in a tight spot and about to lose their home if we couldn’t get the reverse mortgage application taken, processed, closed and funded within the three weeks to the date of the late afternoon phone call. There were no exceptions to getting an extension of the redemption period.

Being from a smaller town, they hadn’t heard about reverse mortgages previously until they were visiting relatives in another state and heard them advertised. When back in Minnesota they looked up reverse mortgages and found their way to us. After an initial two-hour conversation explaining the details and terms of the HUD insured Home Equity Conversion Mortgage (or HECM) they decided to proceed knowing their only option to save their home was the reverse mortgage… they had already checked out other options with no success.

The first thing needed was their HUD required reverse mortgage counseling. Fortunately they were able to receive the counseling the next day. Once we received the counseling certificate with their signatures, on Friday, the following day, the application was taken and then the processing began. FHA Case number was assigned, title work ordered, appraisal order placed, credit report and flood certification obtained.

Then the surprises arrived. First was a lien from Veterans Affairs that would need to be paid. The credit report showed a judgment from a credit card debt that was also required to be paid. Then the appraised value came in less than expected. And the appraiser stated the roof needed repair along with another small repair. This meant that the Ken and Mary would need to get contractor bids for the required repairs.

These factors meant a difference in the amount of reverse mortgage funds that would be available. When the calculations were run, in order to pay off the mortgage in foreclosure, the VA lien, the judgment, and set aside funds for the repairs, Ken and Mary needed to bring money to the closing or lose their home.

HUD does not allow extra funds to be borrowed, funds need to be from the borrower’s own resources or a gift. This caused an additional obstacle: they had to come up with the extra money.

Determined to save their home from the foreclosure Ken and Mary worked and addressed all the issues that they faced. Fortunately they received the gift of funds, provided the necessary gift letter and documentation. The contractor’s bids were submitted to us and title work and payoff statements received.

Not an easy task with all the obstacles that popped up along with two weekends and a holiday falling during this time frame. However with lots of phone calls, explanations, guidance, and scrambling to pull everything together, the file was processed and submitted to underwriting, just 12 days after the application, 14 days after the initial phone call.

Two days later the file was underwritten, conditions received, addressed and then cleared. This was on the last day for the file to be closed in order to allow the 3-day rescission period before funding on the last day of the redemption period. The closing department rushed to get the closing package assembled and sent to the title company in time for the Friday afternoon closing.

The following Wednesday, just 3 weeks after that 5:00 p.m. phone call and on the last day for Ken and Mary to redeem their home from foreclosure, the reverse mortgage was funded. The title company representative drove to the county sheriff’s office to personally deliver the payment. Whew, just in time.

With sighs of relief, Ken and Mary are able to stay in the home that they had built and lived in since 1972.

It took a team of many who cared enough to rush things through to save this home from foreclosure. Besides our originator and processor, this included the counselor, the title company, the appraisal management company and appraiser, the lender’s processors, underwriter, closing and funding departments. How rewarding this is for all of us!

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

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

A Minnesota Reverse Mortgage Borrower Speaks Out On The Benefits With Her Reverse Mortgage

Posted on June 12, 2010 by Beth Paterson, CRMP

“I’m a happy consumer of reverse mortgages. I feel that it’s had an unjustly bad name in the past, at least I’ve heard under currents of ‘oh, you wouldn’t like that.’ Well let’s get at this logically. I’ve had a good experience with it and I like Beth’s approach. So I wanted to share my experience and what had changed in my life.

“Life was happy and good with a family and a career. I was all happy and good with the insurance that goes with a nice job. When retirement time came I had a fair pension and that with Social Security were going to see me through things.

“But that didn’t match my goals. I wanted to travel more when I was retired and visit my now expanded family and I was getting charges of $400 – $500 for tickets 2-3 times a year plus indebtedness for rewiring in the house, I wanted to remodel things and was running across some fascinating new hobbies. So I wanted to have new hobbies and travel. And do what was the healthiest thing I could think of on earth which was having a very right good time now and let the future take care of itself if I took care.

“So that led me to talk to some friends when I was running low on funds. Several people referred to the fact that Beth Paterson was quoted on reverse mortgages. To be quoted was quite a credential. I had a meeting with Beth. I was 73 at the time. I was undecided at the time so I waited. Time changed and I still had a lot of ambition and 75 came along and I wanted some improvements in my home and I was confidently that I could likely spend 10 or more years happily in my home if I had home health care. That is a big deal to know when you are 70 something to know that if you fall and need some months of assistance.

“When I talked with Beth the 2nd time it all came together. I was very happy with the amount of care she spent with me. My family was able to call her and get answers to our questions and they were pretty astute questions. Beth took the time to answer every one of them. I had shopped around and I stayed with Beth.

“My life changed from uncertainty on how I was going to pay my electrical bills, and whether I could even stay in this community or whether I needed to move to assisted living which meant moving. That wasn’t the preferred path. I was sure I could stay in my home. I was sure I could get the reverse mortgage loan. And now I was able to get a nice low rate.

“I immediately found that I could get relief from my old small mortgage. [The reverse mortgage needs to be in first lien position which means any current mortgages or liens need to be paid off. This eliminates mortgage payments because there are no payments required on the reverse mortgage. Borrowers are responsible for property taxes and hazard insurance.] The relief was so great that I could now stop worrying about how I could pay this within my income. So I left my Line Of Credit alone – didn’t use it – just the relief for paying off the old mortgage and the old debts and some ability to understand my budget and handle it better.

“Now I have my dignity back and my independence. And my children are heaving sighs of relief because they aren’t worried about me any more – I’ve answered some of their questions: where I do I want to be cared for as I age. They aren’t going to be blind-sided.

“I was very pleased with what happened.”

Edna, who took out her Home Equity Conversion Mortgage (HECM) in 2008, shared this story during a presentation where she joined me recently at a Minnesota senior resource fair workshop.

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.

Using The Reverse Mortgage As A Tool To Strategically Manage One’s Assets

Posted on June 6, 2010 by Beth Paterson, CRMP

Dorothy closed on her Home Equity Conversion Mortgage (HECM) reverse mortgage in 2006. Now four years later during a presentation where she joined me at a Minnesota senior resource fair workshop , she shared how the reverse mortgage has been a tool to strategically manage her assets and the benefits she has received from her reverse mortgage. Here’s what she had to say.

“I have a single family residence and have lived there for many years and working and wasn’t looking too much to the future. I ‘knew’ Social Security was going to take care of me… my mother had gotten by on it and I figured I would too.

“I had worked part time as a travel escort and the travel bug had bitten me through the years. I retired at 65. While the career line I had allowed me to take extra vacation time to escort tours what it didn’t do was provide a pension. So I had no hospitalization or a pension when I retired. I didn’t face those facts right away. I had invested and purchased stocks over the years in modest amounts. I figured that would be my answer to any and everything. When I wanted to travel I just cashed in part of a stock and I took off and did some great fun things.

“However we know the stock market took a plunge a couple of times and what I had was back down to half or less than what I had built up. Also I was having to use this in addition to my Social Security income. Fortunately I was able to have paid off my mortgage by the time I retired so I didn’t have those payments. I thought it would be easy street.

“I had a house paid for and was able to get a line of credit from the bank. Anything I wanted to do I would I just borrow the money on the line of credit. After that climbed I would cash some stock in to pay the line of credit.

“Pretty soon I needed a car. I took out a loan on the car. Those payments got kind of high. Pretty soon I’m paying the line of credit and the car payment. And I was using up my stock portfolio. I was owing more to the bank than I had stock to pay off all this line of credit. The stock broker I was talking with said, you have your house paid for, the best thing I could do would be to get a reverse mortgage.

“Luckily I was able to meet up with Beth Paterson. We talked so I would understand the program. The man I had worked for was a very astute business man and had run a mortgage company. So I took the information to him and asked if there was anything that looked doubtful to him; is there anything that I don’t see or is this something I should do? He said, ‘It’s the best thing in the world for you. I can’t advise you to do anything better for you.’

“I have my reverse mortgage. I decided that as long as I was getting my Social Security and didn’t have to touch my stock, I wanted a reverse mortgage line of credit. I didn’t want a lump sum. My reverse mortgage line of credit would grow at nice increments – it was growing faster than my stock portfolio was growing. [The reverse mortgage line of credit grows at .5% more than the interest on the loan. For example if the interest on the loan is 2.5% the growth rate is 3% on funds left in the line of credit.]

“I also decided to take a minimal monthly payment. Now I’m going to get that payment until I’m 150. I’m going to be 83 this year and I’ve got my mind set that I’m going to live to 150 so that I can get that last dollar from HUD that I’m helping to pay into on this insurance program. [Note the due date listed on the reverse mortgage recorded at the county is the 150th birth date of the youngest borrower.]

“The reverse mortgage has given me a great feeling of security. Because if I want to take a trip I just send a fax in and request the amount of money I want. I don’t have to touch my stock. My line of credit is going up every month as long as there are funds there. It’s much better than CDs.

“I’ve done home repairs, this winter I had to replace my car and it turned out I couldn’t use my driveway so I’ve taken some funds to get my driveway repaired. My yard needed some attention that I had overlooked because I didn’t want to spend the money. So I’ve taken some funds for that too. I still have a nice sum in my line of credit and I haven’t had to use my stock.

“I watch the market go up and down and it’s not life and death like it had been before when I knew I just had that stock and when it was gone then what would I do.

“It’s worked wonders for me. I’ve been able to take trips with the money, repair my house, re-roof it, and do this and that. It’s given me ease of mind and it’s certainly helped my kids because at one point I think they thought they would have to help me financially and they weren’t looking forward to that. Now that worry is off their mind. So as long as I can, I will stay in my home, and that’s what I plan to do.”

This is one example of how a reverse mortgage has made a positive difference in the life of a senior and allowed her to strategically manage her assets during her retirement years.

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.

Basics of Reverse Mortgages – On The Radio

Posted on May 1, 2010 by Beth Paterson, CRMP

This past week I had the pleasure of being a guest on the radio show, “The Unexpected Caregiver” hosted by Kari Berit. We covered the basics of reverse mortgages to clarify the facts and share some stories of Minnesota reverse mortgage borrowers and how they have benefited from a reverse mortgage. Rather than writing this blog post I thought I’d share the link to the show for your listening: The Unexpected Caregiver – The Reverse Mortgage Basics with Beth Paterson – Part 1

Next week I will again be a guest on the radio show when we will cover the myths of reverse mortgages. Be sure to come back and check out this show to learn more about reverse mortgages.

Kari was a great host and deligtful to work with. In addition to Kari hosting the radio show she is an author, speaker and coach. Her book, “The Unexpeccted Caregiver” is full of ideas and resources to use as a caregiver. I love her book and highly recommend it. You can find more information at her website, www.TheUnexpectedCaregiver.com

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

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

Why Be Embarrassed To Do A Reverse Mortgage?

Posted on April 25, 2010 by Beth Paterson, CRMP

Often thought to be a mortgage for those who are cash poor and house rich, with a reverse mortgage there may be an attitude of “I hope to never have to do a reverse mortgage.” And seniors may be embarrassed to let others know they did a reverse mortgage.

Why should there be embarrassment when doing a reverse mortgage when there isn’t an embarrassment when one has a conventional mortgage? Most homeowners have a mortgage or at least did one to purchase their home aren’t embarrassed by this fact. Well, it should be the same with a reverse mortgage. Just as a conventional mortgage isn’t just for the cash poor, house rich the reverse mortgage isn’t either.

A reverse mortgage is a mortgage just like any other but has special terms for senior homeowners 62 and older. To qualify for a conventional mortgage, lenders look at one’s income, credit score, and risks to ensure the loan payments can be made. The reverse mortgage has no income or credit score requirements and no monthly payment requirements which benefits seniors who are often on a fixed income. With a conventional mortgage monthly payments are required – these can sometimes be difficult for seniors to make on their fixed income.

As with a conventional mortgage the title stays in the borrower’s name and the homeowners are responsible for paying their taxes, insurance and maintaining the property.

Additionally there are more options on how the funds are received including monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these. Another difference and benefit for seniors who do a reverse mortgage is that the loan is non-recourse, which means there is no personal liability for borrowers or their estate as long as the borrower or the heirs are not retaining ownership.

The loan amount on the reverse mortgage is determined by the home value, the age of the borrower and what’s called an Expected Interest Rate (only used to determine the loan amount – the interest on the loan can be different). The older one is the more funds are available to them. Closing costs are comparable to a conventional mortgage with an origination fee, appraisal fee, title company charges and recording fees. As a FHA HUD insured loan the Home Equity Conversion Mortgage or HECM fees are regulated by HUD.

HUD insuring the loan provides advantages including guaranteeing the funds are available for borrowers; guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 4% on the adjustable rate, 5.56% on the fixed) compared to other mortgages; providing a line of credit growth rate (available only with reverse mortgages); insuring as a reverse mortgage it is a non-recourse (no personal liability) loan.

In the current mortgage market many seniors don’t qualify for a conventional mortgage so the reverse mortgage is a great option for them. Even if they do qualify for a conventional mortgage, the reverse mortgage can be more beneficial. If they have a conventional mortgage and “life” were to happen seniors often then juggle trying to make the mortgage payments or paying their medical expense or life necessities.

With a limited or fixed income seniors often struggle to maintain their lifestyle. Sometimes they feel they need to work just to pay their bills or pay their conventional mortgage. Refinancing with a reverse mortgage can mean improved cash flow allowing borrowers to maintain their lifestyle. It can also mean that they don’t have to work.

At the age of 70, Len was still working a physically challenging job just to be able to pay their conventional mortgage. When they did the reverse mortgage Len was able to retire and enjoy his time with his family. “[The reverse mortgage] definitely saved us.” they said.

Helen, another Minnesota homeowner, has some retirement investments but rather than cashing in on those she chose to do a reverse mortgage. This allowed her to do some desired home repairs as well as have cash for future needs.

Cheryl wanted to travel so she did the reverse mortgage on her Minnesota home so she could pay off her conventional mortgage and improve her cash flow allowing her the funds to fulfill her desires without touching her retirement funds.

Knowing that the reverse mortgage is like any mortgage but with special terms one should not be embarrassed to do a reverse mortgage rather than a conventional mortgage – after all it’s just another mortgage option.

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 Helps Minnesota Senior To Be Prepared for Future

Posted on April 17, 2010 by Beth Paterson, CRMP

Reverse Mortgage Helped Bob Be Prepared

Bob’s wife passed away so her Social Security was no longer received. To replace the 2^nd Social Security check his financial advisor suggested a reverse mortgage so he could stay in his home and maintain his lifestyle.

We met and discussed his situation, the facts of the reverse mortgage and how it would benefit him. During his decision period, a friend suggested he sell and move into a senior apartment. But he wanted to stay in his home where he had lived for many years and with his many memories. He also wanted to keep his dog, his loyal companion. Besides he decided that moving and selling wasn’t cheaper than staying in his home and living in a senior apartment meant he’d have to make monthly rent payments which would not improve his cash flow which was his goal.

A reverse mortgage is a mortgage like any other mortgage, using the equity in one’s home, but has special terms for senior homeowners 62 and over. There are no income or credit score qualifications and no monthly payments required.* (See below for Financial Assessment requirement.) Senior homeowners maintain the title as the reverse mortgage lender does not own the home. Borrowers are responsible for paying their property taxes and insurance as well as maintaining the home. Reverse mortgage borrowers are highly protected – more so than with any other loan.

The HECM Adjustable Rate program allows for borrowers to receive their funds in monthly payments, line of credit, lump sum or a combination of these. The monthly payments can be structured as tenure payments, received as long as borrowers occupy home as their primary residence, or as they need. The line of credit grows so more funds become available in the future. There is also a HECM Fixed Rate option which is favorable if one is pulling all their funds out in a lump sum.

As a non recourse loan there is no personal responsibility to repay the loan as long as the borrower or the estate is not retaining ownership. This means if the loan balance when due and payable is $200,000 but the home can only be sold for $150,000 the borrower or the estate do not have to come up with the $50,000 as long as they are not retaining ownership. The loan is generally repaid from the sale of the property when the home is no longer the primary residence of the borrower, usually when they move, die or sell. If the home is sold for more than the loan balance the remaining equity goes to the borrower or the estate.

In Bob’s situation, the reverse mortgage paid off his current conventional mortgage and eliminated his mortgage payments – this improved his cash flow. Then Monthly Payments 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.

A summer after he did his reverse mortgage he used some of the funds to take a desired vacation to Yellowstone National Park with his nephew – creating memories for both of them. After he returned from his trip Bob called me to share how happy he was that he was able to take the trip.

Then, as many of my borrowers do, recently he called again. As we were chatting he said that I wouldn’t recognize his house because he’s done some upgrading. In addition he had the home modified so it would be wheelchair accessible. While he doesn’t need this now, he’s prepared for the future when it will be needed. The joy in his voice showed.

Even though he didn’t have his wife to share his life he is able to have the funds to maintain his lifestyle and be prepared for his future in his home. Bob is enjoying his live with security, independence, dignity and control.

*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.

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

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

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