American Retired Seniors

SENIORS – ALWAYS – ALWAYS: Do NOT sign anything you do not understand
Read EVERYTHING before you sign – get a 2nd opinion – If it SOUNDS too good to be true – IT IS
NEVER sign a loan application that has BLANK spaces

Reverse mortgages allow seniors over the age of 62, who are homeowners, to borrow some or all of the equity in their property. The accrued interest and the mortgage principal are paid only after the homeowners move out of the property or die if the homeowner remains in their homes. Reverse mortgages are different than typical conventional mortgages in that the equity diminishes over time, since the homeowner is using the equity, rather than building it up with monthly mortgage payments. Older Americans life expectancy is continues to rise, and many, especially in today’s current recession, may need more income to get through their retirement years. More retirees are also foregoing the idea of leaving large financial portfolios to their children and in many cases cannot even if they wanted to. A reverse mortgage may be a good alternative if the homeowner has a regular need for additional income, lives on a fixed income and does not plan to leave their property as an inheritance to their children.

[youtube]http://www.youtube.com/watch?v=JVoDc-xmv-U[/youtube]

The Good:
A reverse mortgage can help the homeowner maintain financial independence and adequate standard of living and it allows the homeowner to remain in their home and retain ownership. The lender cannot foreclose on your property even if the homeowner lives beyond their life expectations and the amount of the debt surpasses the value of the homeowner’s house. Consider this:

• Homeowners have no mortgage payments as long as they reside in their home
• Social Security and Medicare benefits are not affected by a reverse mortgage
• The homeowner continues to ‘own’ the home not the mortgage lender
• The mortgage lender does not sell the home when the owner dies,

•The mortgage money is tax free and the homeowner’s property ‘stands alone’ when the debt is repaid.

Homeowners may take the proceeds of a reverse mortgage in a lump sum, as monthly payments, or on an as needed basis using an open line of credit.

Consumer Reports states the ideal candidate for reverse mortgages or seniors in their mid-70, who have a significant amount of equity in their property.

The Bad:
A homeowner should not consider a reverse mortgage if they plan to leave their home, free and clear, to their heirs or children or if the homeowner has another less costly means of achieving their financial goals, as reverse mortgage can be an expensive way to borrow money.

In these limited circumstances, the lender can only foreclose on your property if the homeowner falls behind in paying their property taxes or allows the property to fall into disrepair.

There are of course, many fees tacked on to a reverse mortgage during closing, many are the same fees one would encounter at a traditional mortgage closing. Those fees include: origination fee, appraisals, inspections, credit reports, title searches, insurance, recording fees, etc. The lender may also add a fee for servicing the mortgage loan, which could be as much as $30 to $40 a month for those choosing the monthly withdrawal option. The loan origination fee could also be as high as 2% of the loan. All these fees could add up to $15,000 depending on the size of the reverse mortgage loan and these fees are deducted from the overall all amount of the equity of the homeowners.

Additionally, reverse mortgages can be confusing and are more costly than other types of loans. Even though the mortgage is tax free, it may impact the homeowner’s eligibility for public benefits such as Medicaid or Supplemental Social Security (SSI). Be sure to seek counseling from a reputable mortgage lender.

BEWARE of lenders not approved by the government to originate reverse mortgages
ALL Reverse Mortgage lenders must be approved by the Department of Housing and Urban Development to offer HECM reverse mortgages. We have had reports of companies claiming to have HUD approvals originating Reverse Mortgages and attempting to charge rates and fees in excess of those mandated by HUD. This is illegal. Check the HUD website to verify that your Reverse Mortgage lender is truly authorized to originate HECM Reverse Mortgages.

BEWARE of the “Shared Appreciation” scam
The federally insured Home Equity Conversion Mortgage (HECM) does not have an equity sharing or shared-appreciation feature. Any increase in equity belongs to the homeowner and/or their heirs. Stay away from anyone offering the senior the “opportunity” to obtain more money in exchange for giving up a percentage of the future value of the home.
The single most important safeguard to protect you is to carefully choose your Reverse Mortgage lender. Do Not select a Reverse Mortgage lender by simply looking at websites on the Internet. The Internet is full of reverse mortgage scams, ranging from phony calculators to false offers of hard cash.
The Reverse Mortgage Times is constantly researching the market to find those companies who have a solid track record of reliability, commitment and dedication. We verify Reverse Mortgage lenders are properly licensed, approved by the Department of Housing and Urban Development, and strictly adheres to the NRMLA Code of Ethics.

Where to get more information: First contact HUD, who has many authorized reverse mortgage lenders and is the leading reverse mortgage provider. Before making any decisions homeowners need to educate themselves as much as possible. Below are some excellent resources to answer additional questions, such as if one homeowner dies what happens to the spouse, etc.

FEEL FREE TO POST YOUR COMMENTS OR SHARE YOUR EXPERIENCES……….
Resources:
Free Reverse Mortgage Report
ConsumerReports.org – Reverse mortgages
www.hud.gov/buying/rvrsmort.cfm
www.reversemortgage.org
www.aarp.org/revmort

Filed under: Finances