Advantages of a Reverse Mortgage in San Antonio, Texas

Advantages of a Reverse Mortgage
By Dennis Estrada

Using reverse mortgage, any sixty-two years old or over can convert the home equity into cash. The mortgage lenders give the cash by lump sum payment, several payments, credit line, or combination. Here are the common advantages of reverse mortgage.

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The History of Reverse Mortgages and Why They Are So Popular Today in San Antonio, Texas

Reverse mortgages have been around since 1961. The first person to receive a reverse mortgage was Nellie Young through the Deering Savings and Loan Bank of Maine. At that time, the reverse mortgage was issued through the bank itself and any bank could choose whether or not they would do a reverse mortgage. Not a lot of people took advantage of reverse mortgages because there was nothing to guarantee that a bank wouldn’t take advantage of them. Banks also found some risk in doing reverse mortgages because there was nothing to guarantee that the borrowers fully understood what they were doing when taking out this reverse mortgage. The whole system still had a few issues to be worked out.

In 1988 the federal government stepped in and worked out a new law with the AARP to help increase the use of reverse mortgages under government supervision. The law was the Federal Housing Authority Insurance Program where 50 different lenders were chosen across the country to participate in giving out reverse mortgages. It wasn’t until 1989 that the first government supervised reverse mortgage was given out.

As people learned about reverse mortgages, they became more popular. In 1998 the pilot program became an official program that all lenders could participate in. The reason reverse mortgages became so popular is because they allow senior citizens who own a home and have retired to access the equity of their home without any real risks to them. When they are no longer living in the home for whatever reason, the house is then either sold or the family can choose to refinance the mortgage. If the house doesn’t sell for the amount that the reverse mortgage was for, there is no obligation to pay back the difference.

The way that an elder receives their money is completely up to them. They can get a line of credit where they can use the money from the bank as needed. This method will give them the most amount of money for their home. They can also take out the reverse mortgage as a lump sum, although the interest fees they will have to pay on it will be higher than the other options. The most common method of receiving payment from a reverse mortgage is to get a monthly payment. This payment will continue for as long as the person is alive, no matter how long they live or what the amount of the loan was.

There are a few stipulations to receiving a reverse mortgage, although for most people they aren’t a problem. The minimum age a person must be to get a reverse mortgage on their home is 62. They also must not have a current mortgage on the house or they will have to use a portion of their reverse mortgage to pay off the first mortgage. They will also have to go to financial counseling to assure the lender that they are fully aware of what the terms of the loan are and that they can meet their financial responsibility.

Saving Seniors Homes from Foreclosure in San Antonio, Texas Using a Reverse Mortgage

With the economy in the state it’s in today, more and more people are being faced with the possibility of foreclosure. Many people are finding their mortgage payments harder to make each month, and this is especially true for seniors. Many seniors rely on their retirement funds or Social Security benefits to help pay their mortgages, and those accounts sometimes just aren’t enough to keep up. There’s nothing more disheartening than having a home that you’ve worked for years to pay off pulled out from under you.

Fortunately, there are several ways to fend off foreclosure on a home. One of these options that is specific to seniors is a reverse mortgage. It may sound like it wouldn’t be much help since “mortgage” is right in the name and that’s what you’re trying to get rid of – but it really may be the answer to your foreclosure problem.

Reverse mortgages are only available for people of age 62 or higher. A reverse mortgage is somewhat like a home equity loan in that you’re taking out money against your home’s equity. That might not sound terribly useful to someone who still owes money on their home, but a reverse mortgage can actually be taken out on a home that is still being mortgaged. In most cases, a reverse mortgage provides enough of a loan to pay off a primary mortgage and still have money left over.

It is important to note that you can only use a reverse mortgage in this way if the loan will provide enough money to pay off the primary mortgage. In other words, the reverse mortgage has to be the primary lien. Fortunately, unless the home has seen a drastic drop in value or you’ve just taken out a mortgage, this is not a difficult condition to meet. In most cases, you’ll even have access to some extra money that you can put toward home renovations or just save for an emergency.

A reverse mortgage does not come due until the borrower moves out of their home, sells it, or passes away. If the home is sold, the proceeds from the sale are applied against the reverse mortgage. One thing that’s nice is that if proceeds from the sale aren’t enough, then there’s no personal liability for the borrower or their heirs. If the loan ends because the borrower passed, the heirs also have the opportunity to refinance the home.

Reverse mortgages can provide a powerful solution to your foreclosure woes. Now that you have the basic idea, be sure to do some research so that you fully understand the these loans.

How Seniors Use Reverse Mortgages to Increase Cash Flow or to Pay Off an Existing Mortgage in San Antonio, TX

Money is tight for most people with the way that the economy is today, and this can be especially true for seniors. Social security doesn’t tend to be enough to get by and when there are so many bills to pay for such as medical bills and a family to provide for, there isn’t any money left over to enjoy retirement. Things can be especially tough when there is still a mortgage to pay because the interest rates and monthly payments just seem to get higher and higher. Fortunately there is a way for seniors to increase the amount of money they receive monthly and even pay off their mortgage without having to leave behind large debts for their children.

Reverse mortgages have been around since the 1980’s and have come a long way since the first one. They are now supervised by the government and there are laws that lenders and borrowers have to follow in order to complete the reverse mortgage transaction. The way that a reverse mortgage works is different than any other kind of loan because instead of needing money to purchase an item, the person has an item and needs money. In this case, the item would be the home that a person lives in.

A person must be over the age of 62 to qualify for a reverse mortgage. The older the borrower is, the more money they will get from their reverse mortgage.

Some home may not qualify for the reverse mortgage, and other types of homes such as mobile homes have to meet certain restrictions in order to be considered. Any borrower who chooses to get a reverse mortgage must go through counseling to be sure that they understand the loan and that they can afford the fees that go along with it.

Once a senior has been approved for the loan, they can do whatever they want with their money. The most common option is receiving their cash flow in monthly payments that will continue for as long as the borrower is alive, no matter how long they live. Since the borrower is taking out money against the house, when they no longer are no longer in the home, the estate will sell the home to repay the loan, or the family can choose to refinance. If the sale of the house doesn’t make enough money to cover the loan, the borrower doesn’t have to make up the difference, because all reverse mortgages are insured by the federal government.

Saving Seniors from Bankruptcy Using a Reverse Mortgage in San Antonio, Texas

It seems you can’t turn on the television or surf the Internet without hearing about how bad the economy is. A lot of people don’t have to hear about it because they’re experiencing it every day. No one is hit harder by the economic downturn than seniors. Their retirement accounts and social security benefits are dwindling and it seems like there’s no hope in sight. Many unfortunate seniors are being faced with the possibilities of foreclosure and even bankruptcy. Retirement is supposed to be a time to enjoy life, not stress about money!

The good news is that there are ways for seniors to dig themselves out of their immediate debts and avoid declaring bankruptcy. One of these methods is known as a reverse mortgage. While “mortgage” usually implies having to pay something, a reverse mortgage is just the opposite. Essentially, it is a loan taken out against the equity on your home, though it’s slightly different from a standard home equity loan.

Reverse mortgages are available specifically to seniors – anyone of age 62 or more who owns a house or at least most of one. Even if you’re still paying off a mortgage on a home, a reverse mortgage is an option. If you have full ownership of your home then you’re entitled to more money than if you are still paying off a home, but either way you can get a nice windfall to help stave off bankruptcy.

You can choose the size of your reverse mortgage, though it is somewhat limited by your exact age, and is of course based on the value of your home. However, the proceeds gained from a reverse mortgage can be used on absolutely anything. You can pay off all of your outstanding bills and probably still have some money left over to save for future expenses or just to do something fun.

Reverse mortgages are relatively worry free. They do not need to be paid back until you either sell your home or pass away. If you sell your home, then the proceeds from the sale will go toward paying off the principal (note that interest is accrued and not paid until the loan ends). If the proceeds from the sale can’t cover the loans total amount, then the institution that issued the reverse mortgage simply soaks up the difference. If the proceeds exceed the cost of the loan, then any additional money is yours.

In the event that the loan ends due to your passing, then it is up to your heirs to decide what to do. They can choose to refinance the home if they want to keep it, or they can simply sell it. If they sell it, then the same rules apply – they have no personal responsibility, and if there is extra money after the sale it is theirs.

Reverse mortgages can be a useful tool in avoiding bankruptcy. However, the details are fairly complicated so it’s important to understand all you can about them. In every case, you need to take a counseling course that will explain all the finer points of reverse mortgages so you’ll know exactly what you’re doing.

Reverse Mortgages Provide Opportunities for San Antonio, TX Seniors

Here is a great article for anyone who has questions about a reverse mortgage. Visit me at www.texasreverse.net if you need help with a reverse mortgage in the San Antonio TX area.

Reverse mortgages shouldn’t be lumped into ‘bad’ category

“Comparing every loan’s shortcoming – real or perceived – to a “subprime” product needs to stop.”

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Reverse Mortgages: Frequently Asked Questions in San Antonio, Texas

Part Two of Two

How is interest calculated on a reverse mortgage?

Interest on a reverse mortgage is calculated based on the money paid out to you. In general, reverse mortgages have variable rates, though fixed rate reverse mortgages are becoming more popular. Variable rate reverse mortgages are based on certain indexes. Interest is not covered by the proceeds you get from a reverse mortgage – it builds up over the course of the entire loan until it’s repaid.

Does a reverse mortgage affect tax liability?

Reverse mortgages are not counted as standard income, but they may still be partially taxable. The IRS sometimes provide tax breaks for interest paid toward loans, but no interest is paid on reverse mortgages until the loan ends. Thus, this is not a concern until then. The insurance premium that is required to take out a reverse mortgage can be deducted from your taxes for that year.

How do reverse mortgages work with existing mortgages?

Reverse mortgages must be the primary liens on a property, which means that all other debts must be paid off when the loan is taken out. You can use the proceeds from the reverse mortgage to pay off your regular mortgage or other debts so that the reverse mortgage becomes the primary lien. This frees you from making monthly payments which can make it easier to make ends meet.

How do reverse mortgages interact with government assistance programs?

Some people worry that taking out a reverse mortgage will disqualify them from getting social security or other benefits from the government, but this is not the case. The only benefit that may be affected is Medicaid, which is based on how much money you have available. If you spend the money from a reverse mortgage immediately, it will have no effect. If you keep some money, however, it counts as an asset and may disqualify you from Medicaid.

Where can I learn more about reverse mortgages?

There are counseling sessions that are required in order to take out certain types of reverse mortgages. These counseling sessions are designed to ensure that you fully understand the responsibilities and repercussions of taking out this sort of loan. At the end of the session, you’ll be given a certificate that confirms you understand how reverse mortgages work.

Visit me at www.texasreverse.net if you need help with a reverse mortgage in the San Antonio TX area.