Reverse Mortgage
This is a relatively new product that will assist elderly borrowers who are asset rich and cash poor. In simpler terms, many senior citizens have a house that is either paid in full or owes a small balance on their loan; however they be living on Social Security and/or a small pension or 401K. If there is need for more monthly income or a cash infusion to fix up your home and/or both the Reverse mortgage can be for you. To qualify you must be 62 years or older, and you must go through a mandatory education acceptable and/or sponsored by HUD. This will tell you more about the program. It will explain the closing cost, how you can get your money, how to qualify, etc. The home is still yours and you will owe nothing back, so long as you live in the house that you don’t move out for more than one year, that you pay the property taxes and insurance and that you maintain the house. When you pass away, you heirs can pay off the property at the balance and get your home. You NEVER will have to pay the money back EVER, if you meet the conditions listed above. If you ever move into a nursing or assisted care facility for a year or more, the mortgage company can take the home, but you will never owe the money back.
Some have recently suggested that this is equity stripping, but we disagree. Don’t get a loan to help your kids or if you do not need the money, but many senior citizens have been able to make their budgets because of this program.
There are at least three different types of reverse mortgages. These are the FHA’s Home Equity Conversion Mortgage (HECM), Fannie Mae’s Home Keeper Mortgage, and bank reverse mortgage loans. Most reverse mortgage loans are done as an FHA HECM loan or when the amount is too large for the HECM a reverse loan from several of the large reverse mortgage companies specializing in this through their bank.
Advantages:
- You don’t have to pay it back, if you reside in it for 12 consecutive months, keep it in repair, pay the property taxes and hazard insurance.
- Very easy to qualify. Credit does not matter, so long as judgments do not impair your property.
- The benefit you receive does not affect your Social Security or Medicare benefits. It is a loan.
- You can get a lump sum, a line of credit or combination of both as needed.
Disadvantages:
- You will be taking equity out of your home.
- Your heirs will not get as much inheritance as they would without the loan.
When should you consider this loan?
- If you need cash for retirement and have little money and equity in your home, then this loan is for you.
Never get any loan you do not need. Remember this is a loan, even if you do not have to pay it back, it is still a loan. Get you children and talk to them about your plans if you are interested and both you and your children talk to a qualified Mortgage Broker or Mortgage Banker who specializes in reverse mortgage and see the links below for more information.
- FHA information site on Reverse mortgages: http://www.huddirect.us/.
- FHA Top Ten Things to know about reserve mortgages: http://170.97.67.13/offices/hsg/sfh/hecm/rmtopten.cfm.
- Fannie Mae Brochure on Reverse Mortgages: http://www.fanniemae.com/global/pdf/homebuyers/moneyfromhome.pdf.
MCA offers a product to protect you against potential mortgage fraud and over-charging. It is called the Consumer Protection Plan. A Mortgage Professional will review your initial mortgage disclosure documentation and when the loan is ready to close the MCA professional will also review your closing settlement documents to make sure you received the correct program, rate and fees as initially disclosed.
