Reverse mortgages are designed to strengthen the personal and financial independence of senior citizens by providing a source of funds without the usual monthly payment burden. The biggest benefit is that seniors retain ownership of their home for life — guaranteed as long as routine maintenance, insurance and property tax payments are kept up. If you or a loved one are 62 or older, a homeowner and interested in learning about reverse mortgages, attend a free upcoming seminar hosted by Heather L. Johnson of Your Home For Life:
Feb. 29 at 10 a.m. — Lane Memorial Library, 2 Academy Ave.
March 4 at 1:30 p.m. — Hampton Falls Free Library, 7 Drinkwater Road.
Refreshments will be served. Register by calling (800) 690-6646. For a free educational video or a personal consultation on the reverse mortgage program call Johnson at 828-5732 or e-mail her at heather@yourhomeforlife.com.
Wednesday, February 20, 2008
Saturday, February 16, 2008
A Seniors Reverse Mortgage Primer
Facts, information, advice and tips about reverse home mortgages, popular with senior citizens as a way to provide "income" from value of a house in whichone lives.
This is a senior citizen introduction to obtaining and committing to reverse mortgages. More information should be pursued from loan and legal experts before making this important decision.
What is a Reverse Mortgage?
A reverse mortgage is a loan against one's home that requires no repayment for as long as one lives in that home. There are no monthly payments, so an upsideis that one cannot lose their home due to non-payment. Opposite of a regular mortgage, payments are made to the home owner from the loan company.
Who Is Eligible for a Reverse Mortgage?
There are no income requirements, as the loan does not need to be repaid as long as the owners stay in the home. Applicants must own their home outright (or have the mortgage paid off by an advance from the reverse mortgage), and generally must all be at least 62 years old. The home under consideration for a reverse mortgage generally must be one's "principal residence" (as opposed to a rental home). One must live in the house more than half the year. Most single-family properties, two to four unit buildings and some other real estate are eligible. Most mobile homes (or trailer park homes) are not eligible, but there are sometimes exceptions when they are manufactured homes on a permanent foundation and have been converted to "real property" (usually on a piece of land one owns).
What the AARP Says about Reverse Mortgages: "The cash you get from a reverse mortgage can be paid to you in several ways:
- all at once, in a single lump sum of cash;
- as a regular monthly cash advance;
- as a "credit line" account that lets you decide when and how much of your available cash is paid to you; or
- as a combination of these payment methods.
No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home."
The AARP also states on their website, "With a reverse mortgage, the lender sends you cash, and you make no repayments. So the amount you owe (your debt) gets larger as you get more and more cash and more interest is added to your loan balance. As your debt grows, your equity shrinks, unless your home's valueis growing at a high rate. When a reverse mortgage becomes due and payable, you may owe a lot of money and your equity may be very small. If you have the loan for a long time, or ifyour home's value decreases, there may not be any equity left at the end of the loan." The equity in one's home may also rise, as real estate generally rises in value over time.
Facts and Tips About Mortgages that Pay Income to Senior Citizens by Janienne Jennrich.
Considering A HUD Reverse Mortgage? Some Questions You Should Ask Yourself Before Deciding
A Home Equity Conversion Mortgage, often referred to as a HECM, FHA or HUD reverse mortgage, is fast gaining in popularity among seniors as a way to supplement their existing retirement fund. Although still occupying a niche sector within the loan industry, many financial experts expect this relatively new type of loan to form a large part of the lending industry in the coming years.
But, is such a loan right for you? Here are some important questions you should ask yourself before making any decision.
In summary, a HUD reverse mortgage is federally insured. Unlike a traditional mortgage, where the borrower must make monthly repayments to pay back a loan, the lender gives the borrower money. In return the lender puts a lien on the property.
With a traditional mortgage the borrower risks losing their home if they fail to keep up the monthly repayments. With a HECM, they are no monthly repayments so the borrower has no fears about losing their home. AS the borrower withdraws money, the equity in the home diminishes, however, the loan is FHA insured so that the borrower is guaranteed to receive the payments promised if the equity proves insufficient to cover the loan or the lender goes out of business.
The title deeds of the home stay with the borrower and never with the lender; another important difference between the two types of mortgage.
The loan is not payable until the property is no longer the borrower's principal residence, the borrower sells it, or dies. The borrower can remain living in their home for the rest of their lives receiving payments.
To be eligible, the homeowner must be 62 or older, have no mortgage (or a small amount remaining) and there are also certain restrictions on the type of home that qualifies. The borrower does not need to provide proof of income (because there are no monthly repayments) and does not need to have a health check.
Generally, the more valuable your home and the older you are, the more you can borrow.
This sounds great, and for many seniors it's a great way to supplement their retirement funds. However, there are some drawbacks. Firstly, the longer the borrower lives, the less equity will be left in the property; heirs may find that when they come to sell the property, there is little or no equity left.
Also, interest rates can rise and this increases the amount of the interest charged and this can also diminish the amount of equity in the property. There is currently one program that does offer a fixed rate.
So, before deciding on whether a HUD reverse mortgage is right for you, you should ask yourself these questions.
Would a better option be to downsize?
This can release more capital than a HECM and gives the borrower the flexibility of being able to relocate to where ever and whenever they want.
Do you plan to live in your home for the rest of your life?
A HECM really only makes sense for those who plan on staying put. The cost of closing down this type of loan can be expensive.
Could you raise the extra money through other means?
If you require money for a short-term objective, you may be better advised to opt for a home equity loan and then repay pay it over a short period of time. A HECM is more suited for those who want a regular monthly payment over the long term or a large, one-off lump sum.
How much will you get?
You can use one of the many online reverse mortgage calculators. Both AARP and Financial Freedom website provide one that is easy to use and simple to understand.
Do you need the loan now?
Remember, the older you are, the more you can borrow. So, if you don't require the money now, you're better off waiting.
There's now doubt that a HUD reverse mortgage can improve the quality of one's retirement years; you just need to be certain that this type of loan is your best option.
The above is a brief overview by Robin O'Brien from American Chronicle.
But, is such a loan right for you? Here are some important questions you should ask yourself before making any decision.
In summary, a HUD reverse mortgage is federally insured. Unlike a traditional mortgage, where the borrower must make monthly repayments to pay back a loan, the lender gives the borrower money. In return the lender puts a lien on the property.
With a traditional mortgage the borrower risks losing their home if they fail to keep up the monthly repayments. With a HECM, they are no monthly repayments so the borrower has no fears about losing their home. AS the borrower withdraws money, the equity in the home diminishes, however, the loan is FHA insured so that the borrower is guaranteed to receive the payments promised if the equity proves insufficient to cover the loan or the lender goes out of business.
The title deeds of the home stay with the borrower and never with the lender; another important difference between the two types of mortgage.
The loan is not payable until the property is no longer the borrower's principal residence, the borrower sells it, or dies. The borrower can remain living in their home for the rest of their lives receiving payments.
To be eligible, the homeowner must be 62 or older, have no mortgage (or a small amount remaining) and there are also certain restrictions on the type of home that qualifies. The borrower does not need to provide proof of income (because there are no monthly repayments) and does not need to have a health check.
Generally, the more valuable your home and the older you are, the more you can borrow.
This sounds great, and for many seniors it's a great way to supplement their retirement funds. However, there are some drawbacks. Firstly, the longer the borrower lives, the less equity will be left in the property; heirs may find that when they come to sell the property, there is little or no equity left.
Also, interest rates can rise and this increases the amount of the interest charged and this can also diminish the amount of equity in the property. There is currently one program that does offer a fixed rate.
So, before deciding on whether a HUD reverse mortgage is right for you, you should ask yourself these questions.
Would a better option be to downsize?
This can release more capital than a HECM and gives the borrower the flexibility of being able to relocate to where ever and whenever they want.
Do you plan to live in your home for the rest of your life?
A HECM really only makes sense for those who plan on staying put. The cost of closing down this type of loan can be expensive.
Could you raise the extra money through other means?
If you require money for a short-term objective, you may be better advised to opt for a home equity loan and then repay pay it over a short period of time. A HECM is more suited for those who want a regular monthly payment over the long term or a large, one-off lump sum.
How much will you get?
You can use one of the many online reverse mortgage calculators. Both AARP and Financial Freedom website provide one that is easy to use and simple to understand.
Do you need the loan now?
Remember, the older you are, the more you can borrow. So, if you don't require the money now, you're better off waiting.
There's now doubt that a HUD reverse mortgage can improve the quality of one's retirement years; you just need to be certain that this type of loan is your best option.
The above is a brief overview by Robin O'Brien from American Chronicle.
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