Is a Reverse Mortgage Right For You?

(Money Magazine) — On the face of it, a reverse mortgage sounds like a no-lose deal for older homeowners. A lender gives you what amounts to a cash advance on your home equity — no minimum income or credit score required. And you don’t have to pay it back until you move or die, when the proceeds from the house sale typically will be used to close out the loan. But in fact, reverse mortgages have some serious drawbacks. Here’s what you need to know.

You may not be able to borrow that much. A provision in the economic stimulus package raised the maximum home value that could be counted for reverse mortgages from $417,000 to $625,500. But you won’t be able to tap your home up to its full price. The formula for determining loan amounts takes into account your age (the older you are, the more you can borrow) and current interest rates, as well as your home’s value. Anything you owe on your home is subtracted from that amount, as are the loan fees you’ll pay. To see how much you might qualify for, use the calculator at revmort.com/nrmla.

Expect to pay some pretty hefty fees. A reverse mortgage is an expensive loan. In addition to regular closing costs, you’ll pay an origination fee of 2% on the first $200,000 of the loan balance and 1% thereafter, plus a mortgage insurance premium of about 2% and a monthly service charge as well. Though recent legislation has capped the origination fees at $6,000, by the time you add all the other fees you’ll have to pay, the total generally reaches $10,000 to $15,000. So a reverse mortgage doesn’t make sense if you expect to move anytime soon, says Dallas financial planner Michael Anderson.

There’s more risk than you think. Reverse mortgages are particularly appealing to retirees looking to supplement dwindling income from a battered investment portfolio — that’s one reason these loans are up nearly 50% over the past two years. The big risk, especially for younger borrowers (you have to be at least 62 to get the loan): You’ll live longer than you anticipate, run out of money, and won’t have any home equity that you can fall back on. Over the past decade the average age of reverse-mortgage borrowers has fallen from 76 to 72. “One of the first questions to ask yourself is whether you can make the money last,” says reverse-mortgage counselor Brenda Grauer.

Other options may suit you better. Before you can get a reverse mortgage, you’ll be required to attend a session with a counselor who is not affiliated with a lender. This person is supposed to clearly explain the loan’s terms and its drawbacks. But a recent study by the Government Accountability Office found that counseling sessions often fail to warn seniors of all the risks. So before you or your folks sign up, make sure you’ve looked into all the alternatives, such as cutting expenses, taking out a home-equity line of credit, or downsizing your home. Says Grauer: “It’s best to put off taking this loan for as long as you can, so that when you really need it, the money is there.”

Tax FREE money for Seniors (REVERSE MORTGAGES)

TOP TEN THINGS TO KNOW ABOUT REVERSE MORTGAGES.
Reverse Mortgages are becoming popular in America. The U.S. Department of Housing and Urban Development (1-IUD) created one of the first. HUD’s Reverse Mortgage is a federally-insured private loan, and it’s a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. You can receive free information about reverse mortgages by calling AARP at: 1-800- 209-8085, toll-free. Since your home is probably your largest single investment, it’s smart to know more about reverse mortgages, and decide if one is right for you!

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 FHAinsured 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
estate will repay the cash you received from the reverse mortgage, plus interest
other fees, to the lender. The remaining equity in your home, if any, belongs to
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
appraised value of your home or FHA’s mortgage limits for your area, whichever
less. Generally, the more valuable your-home is, the older you are, the lower the interest, the more you can borrow.
9. Should I use an estate planning service to find a reverse mortgage?
I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.
10. How do I receive my payments?
You have five options:
• Tenure – equal monthly payments as long as at least one borrower lives
continues to occupy the property as a principal residence.
• Term – equal monthly payments for a fixed period of months selected.

Seniors and Their Golden Years

A reverse mortgage is exactly what its name implies — a loan whose features make it essentially the reverse of a traditional “forward” mortgage. Instead of making monthly payments, you can choose to receive them. That’s the “reverse” part of a reverse mortgage. Instead of turning your income into equity, you turn your equity into income.

That last feature — the ability to turn your equity into income — is what most distinguishes a reverse mortgage from other loans, and it’s what makes it so valuable to many senior homeowners. Having spent years repaying the mortgage that allowed you to buy your home, you can now tap into that investment to help you achieve your goals later in life. However you plan to use your equity — whether traveling, paying medical expenses, improving your home, or just adding a bit of cushion to your monthly budget — you’ll have a golden opportunity to put your nest egg to good use.

There is no qualify credit score to receive this great program, just age(62).  For more information just call or log on to www.BuyorRefi.Biz