Some retirees have a financial plan that entails selling their current home and moving into an apartment or smaller home. The proceeds from the sale would be used to help fund their retirement. It might sounds like a good plan, but with the current economy and with home prices the way they are, the amount that would be received from selling might make them feel weak in the knees. Also, moving is not for the faint at heart and apartment living maybe a lot different then what most would expect.
For many retirees, this is not a dream but a current reality. If you’re finding yourself or a loved one in this situation, then you may want to take a look at the government insured reverse mortgage.
A reverse mortgage enables homeowners, age 62 and older, to convert a percentage of the equity in their homes to cash, without selling the property. The homeowner always retains title to the home and would still be responsible for the taxes, insurance and maintenance. The homeowner or their estate ultimately has to repay the amount used, plus interest and fees, but repayment is never due until the homeowner dies, sells the home or permanently moves from the home. At no point is the homeowner or their estate responsible for any excess funds needed to sell the home if more is owed than what the home could be sold. However, if the heirs decide to retain the home, the entire outstanding owed balance would be due.
Many Flexible Options
Reverse mortgages offer a lot of flexible financial options. The homeowner can receive money from the program as a lump sum, fixed monthly payments for the rest of their life, a line of credit that can be used to be drawn upon in the future, or any combination of the three. Any money received is not taxed and is not considered as income. Additionally, the reverse mortgage can be changed down the road to a different plan if the need arises.
The beauty of the reverse mortgage is to know that the homeowner can never be forced to leave the home no matter how old they may become as long as the property taxes and insurance payments are current. The amount of money received depends on such factors as age, current interest rates and the value of the home. Income and credit history are not considered for qualification which makes the program more attractive for those who have had trouble qualifying for other traditional loan products.
Of course, there are draw-backs. Compared to a regular mortgage or home-equity loan, the closing costs are usually higher. Therefore, reverse mortgages are not for everyone and should not be entered into lightly, but the benefits of the reverse mortgage may justify the higher costs.
Advice to Remember
It’s a good idea to shop around to see if the mortgage company is knowledgeable and is approved with FHA before committing to use them. Not all mortgage companies are approved with FHA to do reverse mortgages. It would also be a good idea to use a company that specializes only in reverse mortgages because of the vast difference between reverse mortgages and regular forward mortgages.
Another piece of advice is to use a company that is a member of the National Reverse Mortgage Lenders Association. Members of NRMLA subscribe to a higher code of ethics focused on protecting seniors.
Remember to not sign anything unless the process is made clear to you. If you’re unsure about anything during the process, invite a friend or family member to be included. The main goal of the reverse mortgage program is to have peace of mind now and in the future.
Robert E. Jones is a Reverse Mortgage Specialist. For more information about the reverse mortgage program please visit http://www.reversesecure.com/.
Reverse mortgages were not created by a bank; they were created by the federal government to help seniors use the equity in their home in a safe secure way in their retirement years. The correct term for the program is the Home Equity Conversion Mortgage or HECM. I have closed hundreds of reverse mortgages and never have had a client come back to me and be displeased with the outcome.
The best part of a reverse mortgage is that it’s never due unless both seniors pass away, move permanently from the home or sell the house. They could live to be 105 years old and never pay back any of the money they have used, yet have full access to the home like they owned it free and clear.
The two draw backs are:
1st, if they plan to move or sell the home in the near future I would not recommend a reverse mortgage because the fees would then be due. The fees are deferred until the reverse mortgage is paid or the home is sold.
2nd, the children of the parents will not receive as big of an inheritance from the home because the parents would be using the money for themselves while they are alive. I have found the children would rather have their parents use their equity in their home to benefit them while there alive, instead of waiting for them to pass away and watching them penny pinch in their senior years.
If more is owed on the home when they pass away the children are not responsible for any excess money needed to sell the home. They would just take out the personal belongings from their parents and hand the keys over to the government and walk away not paying anything.
I have been in a lot of situations were a single widower could not make their monthly bills or mortgage payment because their spouse passed away and with that their income went with them. A reverse mortgage was the only way for them to stay in their home, otherwise they would have had to sell the home and move in with family or get a smaller less expensive home.
Please call Robert Jones at 480-467-1107 if you would like more information or visit him on the web at: http://www.reversesecure.com/.
Seniors today often live with a great deal of financial uncertainty. The retirement they imagined may be different than what they once thought. Incomes are flat or declining, living and medical expenses are higher than ever before and those who have a mortgage feel that they’ll never pay it off at least within their lifetime. The future might look bleak, but the government has helped with a program for senior homeowners called the Reverse Mortgage. Even those who have heard of them may be unsure about how they work, who can qualify and how to get one.
A Reverse Mortgage is a government funded program that allows senior homeowners to convert a portion of their home equity into usable money they can use now or in the future. The funds are not taxable and don’t interfere with Social Security or Medicare benefits. The senior always retains title to the home as well as any future appreciation in value. The program is never due unless both seniors pass away, sell or move out permanently. The senior can’t be forced to move and unlike a traditional mortgage, no monthly payments are required on what is owed. In other words the senior can live to be as old as they want, having full access of their current home, never having to pay back the money that is owed as long as they are living in the home.
Many seniors are finding that a reverse mortgage is a financial tool and a good way to obtain needed funds if they have their home paid off. However, it’s also a way to pay off an existing mortgage. The program has the power to not only provide money for monthly living expenses, home improvements, vacations and healthcare, but it can, in fact, save hundreds and even thousands of dollars a month by removing a senior’s monthly mortgage payment. In most cases that alone could dramatically change a senior’s financial future.
To qualify, a senior must be a homeowner who is at least 62 years of age. The amount they can qualify depends on the value of the home, the amount of equity in the home and current age.
Since the year 2000, Reverse Mortgages have grown and have been a way to relieve a mortgage payment or have a steady source of monthly income. As incomes become fixed and retirement funds become increasingly hard to find, seniors are discovering a Reverse Mortgage may be the perfect solution.
If you’re considering purchasing a new home and are over the age of 62, a new financial tool has become available as of January 2009. The FHA Reverse Mortgage can now be used to purchase a new primary residence allowing seniors to get the same result as paying cash for the home. The outstanding owed balance is never due unless the home is sold, both homeowners pass away or both move permanently from the home, if married.
Many seniors are finding that the home they raised their family in is too large or not properly equipped to handle their current needs. Some would rather be close to children and grandchildren or in a warmer more favorable climate. A smaller updated home with new appliances and fewer chances of repairs would be just the thing to enhance their retirement years. Homes are being sold at record lows and many are seeing great deals that never would have been available if were not for the current recession.
The Reverse Mortgage Purchase or HECM for Purchase program also allows potential buyers to buy a new home with no credit or income requirements, and no payments on the outstanding owed balance no matter how old they may become for as long as they occupy the home.
The following are some of the benefits of using a Reverse Mortgage to purchase a home:
- The title of the property always remains in the homeowners name, never changing ownership.
- The home can be sold at any time without a pre-payment penalty.
- Employment or income is not needed to qualify.
- Good credit and credit score is not required.
- A Reverse Mortgage is only due when both homeowners pass away, sell the home or both choose to vacate the property.
- No monthly mortgage payment on the outstanding owed balance.
- A Reverse Mortgage can not go into foreclosure as long as one of the qualified occupants is living in the home. Considered a non-recourse loan.
- It can be paid like a regular mortgage for a tax deduction or to limit the amount added to what is owed.
The down payment requirements are based on age and current interest rates. The older the person, the less money is needed to purchase the home. Find out how much you would qualify by using a Reverse Mortgage Purchase Calculator.
HUD has a website that has a wealth of information and is the primary provider for Reverse Mortgages. They also provide a list of approved lenders in local areas. Not all bank lenders can offer the program and consumers cannot go to HUD directly to get a Reverse Mortgage, but it’s important to find out if the lender is approved with HUD.
The government also requires potential users of a Reverse Mortgage to talk to a HUD approved counseling agency. The counseling can be done over the phone or in person. The counselor will go over the program again, verify there is no one forcing them to do the Reverse Mortgage and verify the bank or lender is in good standing and able to offer Reverse Mortgages. The bank or lender will also provide a list of counselors with phone numbers that can be called for an appointment.
It’s a good idea to shop around and see if the company is knowledgeable and has done a Reverse Mortgage as a purchase before committing to use them. Using a Reverse Mortgage as a purchase is a relatively new program and not all companies know or are able to do them. It would also be a good idea to use a company that specializes only in Reverse Mortgages because of the vast difference between Reverse Mortgages and regular forward mortgages.
Another option would be to use a Reverse Mortgage on your current home and use the proceeds to purchase a second home. The money from the Reverse Mortgage can be used in any manner and by doing so the second home can be acquired with out having a monthly mortgage payment. One stipulation the government requires is not to have more than 4 dwellings.
For more information visit www.reversesecure.com or call Robert Jones at Sun American Mortgage in Mesa Arizona at 800-490-0526.
