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.”
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.
Part One of Two
What is a reverse mortgage?
A reverse mortgage is a special type of mortgage that’s only available to people ages 62 and older. In a normal mortgage, a bank or other financial institution provides a loan to help a person or family buy a home, and the borrower pays back money each month. With a reverse mortgage, money is taken out against a home and paid to the borrower in one lump sum or in monthly payments.
How is a reverse mortgage paid back?
All payments on a reverse mortgage are deferred until the borrower dies, leaves their home or sells their home. Then, many different things can happen. If the home is sold, then the proceeds from the sale can be applied against the reverse mortgage. If the proceeds aren’t enough to cover the cost of the loan, then the lending institution pays the rest. If the proceeds exceed the amount of loan, then the extra moneys goes to the borrower. In the case of the borrower’s death, the borrower’s heirs can either refinance the house or sell it under the same conditions outlined above.
What can the money from a reverse mortgage be used for?
Money from a reverse mortgage can be used for anything at all. Most often, people take out reverse mortgages to supplement a dwindling retirement account. However, one might also take out a reverse mortgage to pursue a lifelong dream or spend some time traveling before settling down for good. Reverse mortgage funds might also be used for home repairs or even to prevent a bank from foreclosing on a home.
How do I qualify for a reverse mortgage?
Most standard types of homes qualify for reverse mortgages. Single family homes, properties with 2-4 units, condos, townhomes, and manufactured homes can all work for reverse mortgages. In some cases, you may even be able to take out a reverse mortgage on a home that still has a traditional mortgage. There are no special requirements for borrowers in terms of medical health or personal income.
How much money can you get from a reverse mortgage?
The amount of money that can be received from a reverse mortgage is dependent on the age of the homeowners, the value of the home, and the current interest rates. The general rule is that the more one’s home is worth and the older they are, the more money they can get. The money can be paid in any number of ways, including monthly payments, a single lump sum, and a flexible line of credit.
Here's a great article I found in the Wall Street Journal that talks about paying off your current mortgage at retirement age.
In many cases we have seniors here in San Antonio, Texas who are using Reverse Mortgages to pay off current loans.
If you would like more information on how to pay off your current mortgage at retirement age be sure to visit our website at www.texasreverse.net.
Read the Wall Street Journal Article: "Retiring? Pay Off Your Mortgage" at:
Money Management International (MMI) announced that as of July 1st, 2009 it’s no longer charging clients for reverse mortgage counseling. According to a company statement, MMI believes it has sufficient grant funds to cover expenses until at least October 2009, at which time new HUD grant funds will become available.
MMI expects there will be large demand for HECM counseling, so it will limit capacity to about 3,500 sessions each month, but all seniors calling MMI to receive counseling by phone or in any of its branches will not be charged.
MMI is a national intermediary, so it should be listed on every counseling list given to a client. However, HUD does not permit lenders to steer to any particular agency, but having a no cost option for counseling is a great thing to have.
Money Management International (MMI) and its family of Consumer Credit Counseling Service (CCCS) agencies make up the largest nonprofit, full-service credit counseling agency in the US and provides counseling 24/7.
Contact me at www.texasreverse.net.
AARP answers your questions:
The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the federal government. HECM loans are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD).
The FHA tells HECM lenders how much they can lend you, based on your age and your home's value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations.
HECMs Versus Other Reverses
HECM loans generally provide the largest loan advances of any reverse mortgage. HECMs also give you the most choices in how the loan is paid to you, and you can use the money for any purpose.
Although they can be costly, HECMs are generally less expensive than privately-insured reverse mortgages. Other reverse mortgages may have smaller fees, but they generally have higher interest rates. On the whole, HECMs are likely to cost less in most cases. A notable exception may be the reverse mortgages now being developed by some credit unions.
The only reverse mortgages that always cost the least are ones offered by state or local governments. These loans typically must be used for one specific purpose only, for example, to repair your home, or pay your property taxes. They also generally are available only to homeowners with low to moderate incomes.
Who is Eligible
HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. To be eligible for a HECM loan:
• you, and any other current owners of your home, must be aged 62 or over, and live in your home as a principal residence;
• your home must be a single-family residence in a 1- to 4-unit dwelling, a condominium, or part of a planned unit development (PUD). Some manufactured homes are eligible, but most mobile homes are not; cooperatives are expected to become eligible by the end of 2008.
• your home must meet HUD's minimum property standards, but you can use the HECM to pay for repairs that may be required; and
• you must discuss the program with a counselor from a HUD-approved counseling agency.
Repaying a HECM
As with most reverse mortgages, you must repay a HECM loan in full when the last surviving borrower dies or sells the home. It also may become due if:
• you allow the property to deteriorate, except for reasonable wear and tear, and you fail to correct the problem; or
• all borrowers permanently move to a new principal residence; or
• the last surviving borrower fails to live in the home for 12 months in a row because of physical or mental illness; or
• you fail to pay property taxes or hazard insurance, or violate any other borrower obligation.
Debt Limit
If your rising HECM loan balance ever grows to equal the value of your home, then your total debt is limited by the value of your home if the home is sold to repay the loan. But if the home is not sold and the loan is repaid with other funds, then you or your estate would owe the full loan balance–even if it is greater than your home’s value. Your heirs would not have any personal liability for repaying the loan.
Visit me at www.texasreverse.net if you have any questions, or need help with a reverse mortgage in the San Antonio TX area.
I saw this article written by Phillip Moeller in The US News and World Report and thought you might want to take a look.
If you are considering a Reverse Mortgage in San Antonio TX, this is important information to have! Visit me at www.texasreverse.net with any questions.
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