Reverse Mortgage

Anyone know someone who did a reverse mortgage? My dad who is retired and 75 yrs old is thinking about doing this. Anyone have experience with these?

Re: Reverse Mortgage

not sure what that is

Re: Reverse Mortgage

Here is some good information: http://www.aarp.org/money/revmort/

Re: Reverse Mortgage

Please be careful with these- not all are good

some are scams- I can ask my DH- but the AARP website should have the info

Message edited 3/30/2007 11:48:49 AM.

Re: Reverse Mortgage

Reverse mortgages are great for seniors who need income each month.

They would take out a mortgage and rather than pay into every month, they would receive a check. It's similar to a line or credit.

Also, when they go to the "closing" they have an option to receive a lump sum of money.

For seniors who need the money and have the equity in the house to do it, I'm all for it.

Re: Reverse Mortgage

This is an excellent idea for someone who has owned their own for a long time and has a large amount of equity. I would be careful as to who I contacted for this. Some places are scams. Definitely check out the AARP website. They should be able to point you in the right direction. My husband and I will be looking into this when he turns 62.

Re: Reverse Mortgage

Thanks. My dad has already been to the AARP site. This is the site he forwarded me when he informed me about it. It seems he has done his homework about it. I have mixed feelings about it. Some tell me it's good others tell me it's not. He's using Wells Fargo. He meets the criteria for it.

It's like pulling teeth to get him to give me more specifics about his monthly cash flow needs so I cannot make an informed decision whether it is good for him or not.

Re: Reverse Mortgage

I'm pretty sure that I heard on Suze Orman that she thinks it's a good option for some seniors. I wish she had more advice on the internet so I could find solid evidence though.


this is all I could find - but here are some more sources:

http://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=MD012&SRCN=aoedetails&GnavID=20&SnavID=22&TnavID=&AreasofExpertiseID=43

Message edited 3/30/2007 12:40:50 PM.

Re: Reverse Mortgage

Its great for him, he just will not have the house to pass on. If he needs the income and is working with reputable company than it might be a good fit. Its not an ideal way to plan for retirement, but in a pinch I'm glad its there for folks who need the money to live.

Re: Reverse Mortgage

Re: Reverse Mortgage

Yeah, I agree with you guys. By the way it's a Home Equity Conversion Mortgage (HECM) he's applying for which is suppose to the better of the Reverse Mortgage's.

Thanks for all the info!

Re: Reverse Mortgage

This is all from HUD.gov:

The Home Equity Conversion Mortgage
Summary:
The Home Equity Conversion Mortgage program enables older homeowners to withdraw some of the equity in their home in the form of monthly payments for life or a fixed term, or in a lump sum, or through a line of credit.


Purpose:
The Home Equity Conversion Mortgage Program (HECM) can enable an older home owning family to stay in their home while using some of its built up equity. The program allows such a household to get an insured reverse mortgage-a mortgage that converts equity into income. Because older persons can be vulnerable to fraudulent practices, the program requires that persons receive free reverse mortgage housing counseling from a HUD-approved reverse mortgage counseling agency before applying for a reverse mortgage. FHA insures HECM loans to protect lenders against loss if amounts withdrawn exceed equity when the property is sold.

Type of Assistance:
HECM can be used by homeowners who are 62 years of age and older. The total income that an owner can receive through HECM is the maximum claim amount, which is calculated with a formula including the age of the owner(s), the interest rate, and the value of the home. For example, on the basis of a loan at recent interest rates, a 65-year-old could borrow up to 26 percent of the home's value, a 75-year-old could borrow up to 39 percent, and an 85-year-old could borrow up to 56 percent.

Borrowers may choose one of five payment options: (1) tenure, which gives the borrower a monthly payment from the lender for as long as the borrower lives and continues to occupy the home as a principal residence; (2) term, which gives the borrower monthly payments for a fixed period selected by the borrower; (3) line of credit, which allows the borrower to make withdrawals up to a maximum amount, at times and in amounts of the borrower's choosing; (4) modified tenure, which combines the tenure option with a line of credit; and (5) modified term, which combines the term option with a line of credit.

The borrower remains the owner of the home and may sell it and move at any time, keeping the sales proceeds that exceed the mortgage balance. A borrower cannot be forced to sell the home to pay off the mortgage, even if the mortgage balance grows to exceed the value of the property. A HECM loan need not be repaid until the borrower moves, sells, or dies. When the loan must be paid, if it exceeds the value of the property, the borrower (or the heirs) will owe no more than the value of the property. FHA insurance will cover any balance due the lender.

Two mortgage insurance premiums are collected to pay for HECM: an up front premium (2 percent of the home's value), which can be financed by the lender, and a monthly premium (which equals 0.5 percent per year of the mortgage balance). The lender's loan origination charge can vary, but only up to $1,800 in such charges may be financed by HECM. Borrowers may be charged appraisal and inspection fees set by HUD; these charges can also be financed.

The Reverse Mortgage
1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well.

2. Can I qualify for a HUD reverse mortgage?

To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

3. Can I apply if I didn't buy my present house with FHA mortgage insurance?

Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

4. What types of homes are eligible?

Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

5. What's the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

6. Can the lender take my home away if I outlive the loan?

No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

Re: Reverse Mortgage