You have seen them on TV, you have received dozens of pieces of junk mail regarding them, but where do you get the facts and how do you decide if a reverse mortgage is right for you?
The best resource for reverse mortgage facts is professional or non-profit organizations. Many reverse mortgage lenders will provide you with DVDs/videos to watch. These generally will give you an idea of how reverse mortgage works, However, “the devil is in the details”. There are several consumer-based reverse mortgage guides that will provide you with what you need and with the questions that you should ask yourself in the process of researching reverse mortgages.
National Reverse Mortgage Lender’s Guide “Just the FAQs” click here
It is advisable to talk to at least a couple of different lenders. Look for consistency in the information. Do not tolerate being sold to. Be sure to check out the company and the originator online. Ask for references. When you speak to lenders, if they simply talk about the features and benefits to the program, be a little cautious. A seasoned originator will ask questions to help you discover if you should even consider a reverse mortgage. Examples:
How long do you plan to live in your home?
Do you live in an age friendly home?
Have you done a budget? Do you know that you can support yourself comfortably in your home?
Is this a home you can comfortably maintain as you age?
The person/company you choose to work with needs to be:
Knowledgeable
Informative
Credible
Act in a fiduciary manor
If you have a reverse mortgage question, Call Angella Conrard, Certified Reverse Mortgage Professional. 866-949-7030.
Ms. C of HueytownAlabama initially made an inquiry of reverse mortgages in January of 2010. Like most borrower’s she started her research online. She had heard of all kinds of bad things about reverse mortgages. Many of her friends told her not to do it. She heard things like the bank will take your house and why would you ever want to do something like that.
I contacted Ms. C after her inquiry. She was cautious (as she should be). I provided her with educational materials and followed up with her to answer questions. She told me she didn’t want the reverse mortgage and that I should take her off my contact list, which I did. November 2010, Ms. C called me and said she wanted to revisit the possibility of doing the reverse mortgage. After, researching each program and her options, she chose the LIBOR HECM adjustable program with the credit line. For her needs of a small lien payoff and a conservative immediate cash need, the credit line proved to be the most financially conservative program for her.
“Angella, Thank you for the help and patience in working with me. I appreciate all that you did. After a long time of reading and studying this was a great thing I chose to do. You are a great person to work with and a very efficient one. Hope to talk to you again, Ms. C”
When considering whether or not to do a reverse mortgage it is important not to rush into your decision, consider all your options, do your research, make a budget and make a plan. Choose someone you trust and who is willing to work with you at your pace.
One of the most important components of attaining a reverse mortgage is your FHAappraisal. Your appraisal will be performed by an independent third-party licensed appraiser. His or her job is to professionally value your home.
HUD issued a mortgagee letter (2009-28) indicating that all lenders must assure appraiser independence as a third party. Most lenders use appraisal management companies to comply with these guidelines. Your lender will order your appraisal. The management company will randomly select a FHA approved appraiser from your area to perform the inspection.
There are three components of the appraisal process:
inspection
attain comparables
compile and submit final report
What to expect
You must be home during the time of the inspection. The appraiser will draw a sketch of the inside of your home. As the appraiser walks through your home they will note the amenities and any updates or upgrades you've done to your home. Generally it is the appraiser's job to make notes of these items however it can be helpful if you make a list of them and provide them to the appraiser. This will reduce the chance of the appraiser missing any items or updates of value that are not obvious.
The appraiser will inspect each room and take pictures. They will also go outside and measure the outside of your home and take more pictures. The entire appraisal inspection process is usually no more than 15 to 20 min.
The appraiser will check what type of heating and air that you have in your home. Uncompleted rooms cannot be counted in your gross living area/square footage. For room to be considered a bedroom, the room must have a closet. A bath is considered a full bath if it has just a shower that it does not need to have a bathtub. And appraisal inspection is not a home inspection. The appraiser will just assume that utilities are functioning and operating. Finished basements do add value however they do not add square footage to your gross living area.
The appraiser will look for any physical damage in your home or basic flaws. Examples:
holes in the wall
peeling paint
exposed wiring (ex: a missing light fixture in the ceiling must be capped)
water damage or signs of water leakage
cracks in the walls, ceiling
foundation issues
roof integrity
Any repairs that are similar to those above must be completed prior to the completion of your reverse mortgage or a contractors bid for the repairs must be submitted to the underwriting dept. If you choose to close your reverse mortgage prior to the completion of the repairs, the lender will hold back 150% of the repair bid and an administration fee. Once the repairs are completed you will need to notify the lender so that they can order the appraiser to come out to do another inspection. The lender will then release the funds held back. If you choose to complete the repairs prior to the close of your loan, the appraiser will perform a final inspection and there will be no funds held back. A final inspection is typically $100-$150.
Typically appraisals are $450-$550 through an appraisal management company and are paid prior to inspection. Once your inspection is complete your appraiser will use local comparable properties that are similar in size, age and type in the process of placing a value on your home.
If you have a reverse mortgage question, Call Angella Conrard, 866-949-7030 or log onto www.reverse-your-mortgage.com.
Are you considering a reverse mortgage? In the past when you attained a traditional mortgage, one of the first things you searched for was the lowest rate, not so with a reverse mortgage.
There are various reverse mortgage programs that may suit your needs. The lowest rate reverse mortgage may not be the program that is best suited for your goals.
Ask yourself:
Why do you want a reverse mortgage?
What do you think a reverse mortgage will do for you?
The Fixed Rate Standard Program is best suitable for people who have a mortgage to extinguish that is similar in size to the amount they qualify for. It is also suitable for people who need or want a lump sum of money, want the assurance of a fixed rate, or may want to make payments on their loan (none required).
The Libor Adjustable Standard Program is usually used as a cash flow tool for long term goals. It allows you the most flexibility. It is usually the most costly reverse mortgage, but for many may be the most financially conservative.
The Fixed Rate Saver Program has higher rates than the Standard fixed rate program. The upfront costs are smaller. The loan size is also smaller. This might be suitable if you have a smaller mortgage to pay off or would like to use the sum to pay off extra medical or credit card bills. A lump sum must be taken at closing.
The Libor Saver Program is adjustable and similar to the Fixed Saver program in that it has lower upfront costs. This program is sometimes used by borrowers who need to make smaller purchases like a new car or a new roof for the house.
One thing to be sure to know before talking about rates is to know why you want a reverse mortgage and what your goals are. Once established then it is time to go shopping.
When a senior homeowner attains a reverse mortgage they agree to maintain their home, pay their property taxes and keep adequate amounts of homeowners insurance as part of their contract. If a reverse mortgage borrower fails to meet these obligations, they are technically in default of their loan.
Participation in Reverse Mortgage Counseling is a HUD requirement and industry standard prior to attaining a reverse mortgage. During the counseling, the counselor will help borrowers look at budgeting. The counselors job is make sure borrowers understand how a reverse mortgage works in their specific situation and their obligation to the reverse mortgage contract.
Reverse mortgages are wonderful cash flow tools for many senior homeowners. It is important that you make an informed decision as to if it is the right choice for you.
If you have a reverse mortgage question, call Angella Conrard, Reverse Mortgage Advisor, CRMP. 866-949-7030.
The credit limit of $625,500 was set to expire on December 31, 2010. This change in extension of the lending limits will help seniors with home values in excess of $417,000 access more cash proceeds through the process of getting a reverse mortgage.
Reverse mortgages are becoming popular in America. HUD’s Federal Housing Administration (FHA) created one of the first, the HOME Equity Conversion Mortgage (HECM). A HECM (also known as a reverse mortgage) is a federally insured loan that enables you to withdraw some of the equity in your home or use the loan proceeds to buy a new primary residence that you will occupy. The HECM is a safe alternative resource that can provide older Americans with greater financial security and independence. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more.
What are the borrower eligibility requirements?
62 years of age or older
Property used as collateral must be the primary residence
No delinquencies on any federal debt, suspensions, debarments, or excluded participation from FHA programs
Completion of HECM counseling
Why is HECM counseling required?
To educate borrowers about using a reverse mortgage
You may be taking care of elderly parents now or looking at that possibility in the near future. According to a report from USATODAY/ABCNews/Gallup Poll, 41% of baby boomers are helping take care of elderly parents by providing personal help or financial assistance or both.
If financial planning and long term care planning have not been done previous to the need for care, the burden falls on the caregiving family member. Decisions about how care will be paid for, who will be responsible for managing the estate as well as how the long term care will be given can cause stress and contention among family members.
It is best for parents and all family members to be involved in planning for future financial needs. The financial resources being used today could change drastically with the occurrence of a stroke, illness or onset of dementia. In order to plan financially for long term care, you need to know what the costs are now and what they will be in the future.
Every year MetLife does a survey of long term care costs. Their 2010 survey shows that the average daily rate for private nursing home is $229 which is up from $219 in 2009. Assisted living monthly base rate cost rose to $3,293 in 2010 from $3131 in 2009. Home health aids average $21 an hour.
Planning financial needs can be very difficult, considering you do not know when long term care will be required or how long it will be needed. You can determine what will be needed in certain living situations. Staying in your home for care will require Professional Home Care assistance, travel accommodations to doctor appointments, help with shopping, meals, medical supplies and medication and possibly a 24-hour attendant. Even if a family member is doing most of the care, eventually professional care will be required or a move to a nursing home facility will be necessary.
When evaluating your present income and assets consider how they would work for future needs.
Do I have to sell the house to pay for other living arrangements?
Are there other financing alternatives?
Do I have life Insurance or the means to pay for a funeral and burial?
Will my spouse be cared for financially?
Should I do Medicaid planning?
Do I have the legal documents that may be needed?
An article by Thomas Day, Director of the National Care Planning Council, titled “Paying the Cost of Care,” reviews some of the financial options that can be used.
“Tangible assets that might produce enough income to pay for long term care might include investment property such as rentals, commercially leased property, land, a farm, second home or a business..."
"Some individuals are heavy into real estate and short on cash. If the intent was to cash out of the investment at some future point, then a sale is warranted. But, it seems a shame to sacrifice in early years to establish an investment only to throw it away to long term care. It would make more sense to use income from the investments to buy long term care insurance."
Long term care insurance is one option for paying for care. Long term care insurance helps pay for the care you need when you can no longer care for yourself. It can protect your family's financial future and your own investments. There are qualifications that need to be met with health and age. This type of insurance is more expensive the older the person and almost impossible to get if age related illness has already occurred.
Senior Financial Planners are expert in working with seniors and their families to set up long term care plans. They usually work with an Elder law Attorney and Care Manager (Professional) to give you all options and resources for care.
Elder Law Attorneys help with Medicaid Planning and Asset protection as well as legal documents needed for final requests.
If staying in your home is a desired option, a Reverse Mortgage can supply the funds to pay for home care.
Another option for veterans who served during a time of war is the Aid & Attendance Benefit. This benefit provides extra income up to $1,949 to help pay for home care, assisted living and medical costs. It will also pay for widows or widowers of the Veteran. To learn more about qualifications for these benefits contact a Veteran Benefit Consultant in your area.
Knowing your needs and financial resources is paramount before making any long term care decisions. Working together, both parents and family members can ease the stress and burden of elder care needs.
Reverse mortgage borrowers are much more sophisticated in comparison to five years ago. The popularity of the programs and the Internet has contributed to a vast amount of information available to consumers. Nine times out of 10 when I talk to a client, they have already done their research on how a reverse mortgage works. They have often talked to several loan originators and are anxious to talk about rates and costs. Too often when I explain that there are fixed rate and adjustable rate programs available, clients will immediately state that they want a fixed rate at the lowest cost. While a fixed rate reverse mortgage program can be applicable in many situations it is not always the wisest choice or the most financially conservative program for everyone.
The most important questions to ask in choosing a reverse mortgage program is how much money do you need/want?
How are you going to use the money?
Do you need the money for income?
Do you have any debt/lien payoff? How much?
Are you going to use the money to make a large purchase such as a car?
When do you want the money?
Are you going to use the money to pay down medical or credit card bills?
Do you need the money for repairs on your home? Do you anticipate needing repairs on your home in the future?
How much will they cost?
Do you have money in reserve?
Do you need an emergency fund?
Is your home age friendly? Or, can be modified to be age friendly?
Will you be able to sustain a budget to take care of yourself and your home including property taxes and homeowners insurance?
This is a major HUD concern for borrowers who are attaining reverse mortgages. There are thousands of reverse mortgage borrowers who are delinquent on property taxes and maintaining homeowners insurance. Delinquency of these items can and will cause a lender to foreclose on your home. These are exceptionally important questions to consider.
Homeowners that do not need as much money or may have a smaller debt/lien payoff might want to consider one of the saver programs. The costs are less and there are smaller amounts that are available to borrow.
Homeowners that plan on living in their home for a long period of time might want to consider the monthly adjustable program. While it is the most expensive program to attain, it is the most flexible. Clients can get a monthly income for life, take money over a specific period of time, or set up a credit line that they can access anytime with great flexibility. Another great aspect of the credit line is that any unused portion will grow at the same rate as the loan +1.25%. This credit line growth rate is independent from both the home value and the loan value.
The fixed rate programs might be more appropriate and attractive for homeowners who have a larger debt/lien to pay off. Or who might need a large sum of money right away. There is some emotional assurance of knowing how much you owe any given time; however again, it is not always the most financially conservative reverse mortgage.
A good reverse mortgage specialist will be happy to quote you programs, costs and rates. A better reverse mortgage specialist will ask you why you want a reverse mortgage and help you answer some the questions listed above, provide you with consumer guides that are not full of marketing hype and stress that it is important that you take your time and make a fully informed decision.
If you have a reverse mortgage question, Call Angella Conrard, Reverse Mortgage Advisor. 866-949-7030; www.reverse-your-mortgage.com.
Starting September 11, 2010, reverse mortgage counselors will be implementing a new counseling protocol.HUD counselors will be required to use the national Council on aging is Financial Interview Tool (FIT) to create a budget for their clients based upon their income, assets, debt and expenses.
This tool is designed for counselors to help their clients understand their current situation, and if a reverse mortgage can assist them in their long-range goals of aging in place.
While some potential reverse mortgage borrowers may consider this new protocol unneeded, meddlesome or a bit lengthy considering that less than 20% of Americans have not had any kind of budget training others might think that it might be helpful and a protocol to prevent disasters for older Americans in the future in the area of successful aging in place with a reverse mortgage.
This new protocol will help potential reverse mortgage clients assess their current financial needs and their future financial needs and if a reverse mortgage should be considered. Counselors will also be completing a BenefitsCheckUp for clients whose income falls 200% below the poverty level or are disabled. This checkup can quickly screen clients for more than 1800 public and private benefits programs that they may be eligible for.
The counselor will provide the potential reverse mortgage client with (the loan originator may also provide):
The role of the counselor is that of an independent third party. Their job is to provide objective information on reverse mortgages to their clients so that they may make a fully informed decision as to if it's for their highest benefit. It's been my experience in working with clients that at the very least HUD reverse mortgage counseling can be a review of the information I've provided for my clients on the nuts and bolts of how reverse mortgages work. For the 20% of potential borrower's that may find this reverse mortgage counseling a bit tedious, in my opinion it's a safety net for those consumers who might not think about the implications of how reverse mortgage will affect them in the long run. This will help avoid defaults from the failure of paying taxes and hazard insurance that would only cause more stress to the FHA insurance program that puts the entire reverse mortgage program at risk, along with that a healthy future market.
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reverse mortgages help seniors strapped for cash More seniors are turning to a reverse mortgage loans these days. A reverse mortgage is a loan that allows seniors to tap into their home equity and use the money to pay for things such as medical bills, groceries and even home repair.
FHA is overwelmed with condo projects to be approved HUD, did away with condo projects ability to be approved with "Spot Condo" proceedures to get a better hold of the data of how many FHA loans exist in what projects. Approvals are adding another month in the process of attaining a reverse mortgage for condo owners.
Older American Home Values are flattening Golden Gateway Financial released new usage data from its online reverse mortgage calculator showing that average home values for older Americans have halted their slide after remaining flat or declining for seven consecutive quarters.
A new survey from the Center for Retirement Research at Boston College found that 40 percent of individuals 45-59 expect to retire later than they had before the downturn, with most of the respondents intending to work an additional four or more years before retirement.
Financial Planning Exchange Forum This is an excellent forum, set up by my friend Bryan Wisda who has a passion in helping seniors and people with finances in general
Obama to Promote Annuities and Other Forms of Guaranteed Life Income The Department of Labor and the Department of the Treasury (the “Agencies”) are soliciting comments whether the agencies could or should enhance the use of lifetime income or other arrangements designed to provide a stream of income after retirement.
One of the questions is related to reverse mortgages:
What are the advantages and disadvantages of approaches that combine annuities with other products (reverse mortgages, long term care insurance), and how prevalent are these combined products in the marketplace?
Why the sudden interest in how the government can enhance the use of lifetime income arrangements?
The New York times recently reported that the Obama Administration is promoting annuities as a tool to give Americans a better shot at a more secure retirement.
Is Reverse Mortgage Interest Deductable? Reverse Mortgage interest deduction rules are the same for traditional loans and for reverse mortgages:
Reverse mortgages are meant for the elderly who will most likely be paying their mortgage and the accrued interest only after they die so the interest deduction is usually just an afterthought. Upon death and on their personal tax returns mortgage interest may be deductible for the original acquisition debt interest, home improvement debt interest and possibly up to $100k of debt on the home for any other use but not deductible for AMT (but it probably won't make that much of a dent in their personal taxes)
Qualified Residence Interest Expense.
Congressional Justification Docs Detail Possible Changes to FHA Reverse Mortgage Program The US Department of Housing and Urban Development published the 2011 Congressional Justifications for the FY 2011 Budget which provides more information regarding the OMB’s $250 million credit subsidy request for the Federal Housing Administration’s reverse mortgage program.
