Reverse Mortgages: Frequently Asked Questions in San Antonio, Texas

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.

Retiring in San Antonio, Texas? Use a Reverse Mortgage to Pay off Your Current Home Loan.

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:

http://online.wsj.com/article/SB125037442701934561.html

Free Reverse Mortgage Counseling in San Antonio, Texas Offered by Money Management International

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.

Who is Eligible for a Reverse Mortgage in San Antonio, Texas and When Does a Reverse Mortgage Need to Be Repaid?

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.

Smart Ways to Access Your Housing Wealth in San Antonio, Texas

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.

Read article HERE.

Reverse Mortgages in San Antonio, Texas Keep Seniors in Their Homes Longer

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

The National Council on Aging Reminds Us: Reverse Mortgages can be used by over 13 million Americans to Remain Independent and in Their Homes Longer

WASHINGTON -- A study released by The National Council on the Aging (NCOA) shows that reverse mortgages can be used by over 13 million Americans to pay for long-term care expenses at home, allowing many to remain independent and in their homes longer.

“The study shows that reverse mortgages have significant potential to help many seniors pay for help at home or to make home modifications. It also points to the need for strong consumer safeguards and lower transaction costs if these loans are to appeal to the millions of older Americans who could potentially benefit,” said NCOA president and CEO James Firman.

According to the study, there are some 9.8 million elder households (aged 62 and older) that are dealing with an impairment that can make it hard to live at home. In total, these households could access as much as $695 billion through reverse mortgages. For individuals, the extra cash could go a long way to help with family caregiving and other long-term care expenses. For example, a borrower aged 75 years old with a home worth $100,000 could receive a reverse mortgage loan that could pay them $500 a month for almost 12 years.

“This is an important study that, for the first time, shows that elderly homeowners, many with chronic conditions, can use reverse mortgages to pay for care at home,” said Jim Knickman, vice president for Research at the Robert Wood Johnson Foundation. “We hope that these findings will prompt new thinking into how the nation addresses the challenge of financing long-term care.”

Reverse mortgages are loans that allow homeowners aged 62 and over to convert home equity into cash while living at home for as long as they want. Borrowers continue to own their homes, and do not need to make any monthly payments. Instead, they can choose to receive the funds as a lump sum, line of credit, or as monthly payments (for up to life). The loan comes due only when the last borrower moves out, dies or sells the home.

The “Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages to Pay for Long Term Care” report, funded by the Centers for Medicare and Medicaid Services and the Robert Wood Johnson Foundation, also shows how reverse mortgages can alleviate financial pressure not only for individuals and families, but also for state Medicaid programs and the federal government. Increasing the market for reverse mortgages could save Medicaid $3.3 billion (with a four percent take up rate) annually by 2010.

"Many seniors and their families can benefit from effective ways to pay for the long term care services they need, in the setting they prefer," said Dr. Mark McClellan, administrator of the Centers for Medicare & Medicaid Services. "NCOA's report shows that reverse mortgages can provide real help in financing long term care needs."

However, there are several obstacles to their growth for this purpose. For example, the NCOA study shows that while two-thirds (67 percent) of older homeowners today have heard of a reverse mortgage, only 9 percent indicate that they are likely to use this financing option to pay for assistance at home. Many worry that they risk impoverishment, or won’t be able to leave a legacy to their children if they tap home equity. The cost of these loans, and current Medicaid policies on how reverse mortgages affect eligibility for long-term care benefits, also appear to be barriers.

“We need expanded public education, and additional work to explore how to reduce the cost of tapping home equity, to strengthen consumer protections, and promote innovation,” said Barbara Stucki, PhD, project manager for NCOA’s Use Your Home to Stay at Home project. “Overcoming these obstacles will mean that reverse mortgages can play an important role in helping many older Americans pay for the supportive services they need to continue to live at home safely and comfortably.”

According to Firman, NCOA will continue to play a leadership role in promoting the appropriate use of reverse mortgages to help pay for long term care at home.

Founded in 1950, The National Council on the Aging is a national network of organizations and individuals dedicated to improving the health and independence of older persons; and increasing their continuing contributions to communities, society, and future generations.; For more information on NCOA, visit www.ncoa.org.

A PowerPoint presentation further explains findings from the report.

The report is also available online.

Background

Reverse Mortgages for Long-Term Care
“Use Your Home to Stay at Home”™

Started in September 2003 by The National Council on the Aging (NCOA), the “Use Your Home to Stay at Home” project has developed a national blueprint for encouraging the use of reverse mortgages to help older Americans pay for long-term care services at home. Reverse mortgages are a special type of loan that allows people age 62 and older to convert equity in their home into cash while they continue to live at home for as long as they want.

Long-Term Care Costs and Home Equity

Currently, the costs of long-term care are primarily paid out of pocket by consumers or by Medicaid, the federal/state program designed to pay costs of health care for low-income individuals. In 2000, our nation spent $135 billion a year on long-term care for those age 65 and older, with the amount likely to double in next 30 years. Most of those dollars pay for care in skilled nursing facilities.

Recent studies show that older Americans, including those who have serious health problems and need long-term care, want to live at home rather than in an institution. Most elders (82 percent of those age 62 and older) own their homes and 74 percent of those own them free and clear. With over $2 trillion tied up in home equity, this financial resource has the potential to dramatically increase the ability of seniors to pay for long-term care at home. Reverse mortgages can free up needed cash while enabling seniors to continue to own their home.

Of the nearly 28 million American households age 62 and older, NCOA has found that almost half (48 percent), or about 13.2 million, are good candidates for a reverse mortgage. The amount that these older households could receive from a reverse mortgage is substantial – on average $72,128. These funds can go a long way to pay for help at home and for retrofitting the home to make it safer and more comfortable. For some, they could be used to purchase long-term care insurance if they qualify. In total, an estimated $953 billion could be available from reverse mortgages for immediate long-term care needs and to promote aging in place.

For many older families, home equity is their single, biggest financial asset. Unlocking these substantial resources can help empower “house rich, cash poor” seniors by giving them additional resources to purchase the services they feel best suit their needs. The use of private funds from reverse mortgages can also strengthen community long-term care programs and reduce the burden on state Medicaid budgets.

Funders

The “Use Your Home to Stay at Home”™ project is funded by the Centers for Medicare and Medicaid Services, the federal agency that operates Medicare and Medicaid, and the Robert Wood Johnson Foundation.

Program Management

James P. Firman, Ed. D., NCOA president and CEO
Jay Greenberg, Sc.D, executive vice president
Barbara Stucki, Ph.D., project manager

Headquarters

The National Council on the Aging
300 D Street SW Suite 801
Washington, DC 20024
(202) 479-1200
(202) 479-0735

About NCOA

Founded in 1950, The National Council on the Aging is a national voluntary network of organizations and individuals dedicated to improving the health and independence of older persons; increasing their continuing contributions to communities, society, and future generations. NCOA is a national voice and powerful advocate for public policies, societal attitudes, and business practices that promote vital aging. NCOA is an innovator, developing new knowledge, testing creative ideas, and translating research into effective programs and services that help community service organizations serve seniors in hundreds of communities. And, NCOA is an activator, turning creative ideas into programs and services that help community services organizations serve seniors in hundreds of communities. For more information on NCOA, visit www.ncoa.org.

Reverse Mortgages Help Seniors Buy Homes and Save Cash in San Antonio, Texas

Reverse mortgages have traditionally been used by seniors to tap equity in their homes. Seniors, age 62 or older, may want to consider a Reverse Mortgage if they want:

1. To preserve their cash

2. No monthly payment

3. To qualify for a loan without any income verification

4. To get a loan despite bad credit

To preserve cash, a senior may want to secure a reverse mortgage instead of paying off their new home with the cash proceeds from the sale of their previous home. The amount seniors can borrow depends on their age(s) and the appraised value of the home being purchased.

Reverse mortgages have no monthly payments-ever. In fact, the homeowner may receive a monthly payment from the home’s equity. The net equity in the home is pledged to repay the HECM when the home is sold after the owner passes away. However, an extended absence for medical treatments or assisted living stay could trigger a forced sale of the home (12 months or longer).

Since the home’s equity will be used to repay the loan, there is no requirement the borrower provide proof of income. In the event the senior is receiving monthly payments from their homes equity, the size of the payments is determined by the projected life span of the borrower(s) and equity available as security. Bad credit is not an obstacle either because the eventual sale of the property, not the senior’s creditworthiness, is how the lender expects to recover their loan disbursements.

The senior can also receive a lump sum of cash to help pay for the home purchase and not receive any monthly payments. Again, the loans are set up so the senior can reside in the home for the remainder of their life. These loans are insured by FHA. Prospective borrowers will be thoroughly counseled on the ins and outs of this unusual loan.

Here’s a few other details:

• Property must be owner occupied primary residence of borrower
• Mortgage insurance premium (MIP) required
• No seller concessions or credits
• Buyer must pay normal closing costs and seller must pay for all repairs
• No gift funds allowed to borrower
• Loan limit is $625,000 through 2009

Most importantly, use a local lender. Contact me at www.texasreverse.net if you have any questions.