Reverse Mortgages, which are becoming more and more prevalent in today’s society, definitely have their fair share of both advocates and critics.  Because of this, many people are often misinformed about how exactly a reverse mortgage could be of benefit to them.   As is usually the case in life, it is better to be educated about something before you decide for or against it.

This week, we once again meet with our resident Reverse Mortgage expert Bruce Parris, who shows us a few situations where these types of mortgages may be of benefit to senior citizens.

Bruce Parris

Mortgage Advisor

817-527-3165 office

1-866-205-2305 toll free

214-783-2235 cell

Hello folks, today let’s talk about a couple of situations I have found some of my clients in where a Reverse Mortgage helped them out substantially.

A spouse passes away.   The home has a $250,000 value and an $80,000 mortgage with a $625 monthly payment.  You want to stay in the home but your monthly income comes up short.  You could sell the house but you would still need somewhere to live.

Here’s a possible answer:  At 70 years old you take out a Tax Free* Reverse Mortgage.  The proceeds pay off your existing mortgage giving you an increase in monthly income of $625.  Plus you have a lump sum of $64,112 in tax free money that can be used anyway you want.

This couple is both 65 years old.  They have a home worth $700,000 with no mortgage.  They have sufficient income to live the life they enjoy.  They now have grand kids ready for college.  They would like to have a way to help out but there monthly income is not enough for what they would like to do.

Here’s a possible answer: They take out a Tax Free* Reverse Mortgage which nets them $344,533 tax free dollars.  They each can now give a monetary gift to the grand children each year.  Tax law determines the amount they can give each year.

Every situation is unique to the individuals involved.  Contact me for a no charge no obligation evaluation of your situation.

*Check with a tax advisor to verify current tax laws.

Reverse Mortgage proceeds are based on the current interest rates at the time of closing, the age of the youngest borrower and the appraised value of the home.  These examples based on an interest rate of 5.49%

As always, if you have any questions about Reverse Mortgages (or any type of home loan for that matter) please don’t hesitate to CONTACT US and we will get back to you immediately.

Bruce Parris

817-527-3165

1-866-205-2305 toll free

What is a reverse mortgage?

Reverse mortgages are FHA-Insured loans on the equity in your home, but you never pay it back as long as you live in your home, so no monthly payments.

Who qualifies?

Anyone 62 years of age who owns a home may qualify.

Does the home have to be paid off already?

No.  Many people use a reverse mortgage to pay off an existing mortgage.

How much money will I receive?

An appraiser will come to your home to determine the market value of your home.  Most clients will receive 40% to 75% of the appraised value of their home or the lending limit, (currently $625,500) set by the FHA, whichever is less.

Is there a tax advantage?

Yes.  When you take out a reverse mortgage the proceeds are non taxable income.  No income tax is due.  If you take money out of your retirement funds that money is taxable.  So a reverse mortgage provides a life style change with no effect on your income taxes.

How long does it take to receive the money?

Normally it takes 4 to 6 weeks to complete a reverse mortgage.

How do I receive the money from the reverse mortgage?

You can receive the money in several ways.  In a lump sum or in monthly payments for as long as you live in your home.  You can take out part of the money with the rest in monthly payments.  Or you can leave it in a line of credit to use as needed.

What is a line of credit?

A line of credit allows you to withdraw money from the bank whenever you wish, in whatever amounts you wish, with a minimum withdrawal of $500.  The money you can access in the account grows, similar to a savings account.  When you pass away, whatever is left in the account is not required to be paid back.  Only the amount you withdraw is part of the reverse mortgage.

What about closing cost?

There are closing costs, which have been drastically reduced this year.  These costs can be rolled in to the mortgage so you do not pay them out of pocket.

How is a reverse mortgage paid back?

After you pass away, the home is left to your heirs.  They can either sell the home, which pays off the reverse mortgage with any remaining money returned to the estate.  Or, if they want to keep the home, they can pay off or refinance the amount owed.

Will any money be left in the home for my heirs when I pass away?

There should be money left for them.  The reason the reverse mortgage only pays you from 40% to 75% of the home value is because the program is set up to so there will be plenty of equity left in the home for your heirs when you pass away.

So does the equity grow in my home after I take out a reverse mortgage?

Yes.  In most cases the interest on the reverse mortgage will be less than the increase in your homes appraised value over a period of years.

If my home loses value, and is worth less than the reverse mortgage when I pass away, will my heirs have to pay the balance?

No.  The FHA insurance insures that the home will never be upside down to your heirs.  The bank can only get the sale price of the home or what they are actually owed whichever is less.

If I pass away first, does my spouse have to sell the home?

No.  Not as long as both of you signed as borrowers and they are still living in the home.

How does the bank make their money?

They make their money on the interest which gradually accumulates on the loan.

Do my heirs have to sell the home immediately after I pass away?

No. The bank gives your heirs up to a year to sell the home.

How can I be sure the bank won’t try to take away my home from me?

The reverse mortgage is a government-run program, so it is insured by the FHA to make sure that the mortgage never changes, and that neither you, nor your heirs, will ever get stuck paying a bill.

Can I get a reverse mortgage on a rental home?

No.  A reverse mortgage can only be taken out on your homestead property.

Will I continue to pay for my homeowner’s insurance and taxes?

Yes.  Those will still be your responsibilities.

Can I ever sell my home?

Yes.  You can sell your home at any time.  You would simply sell your home for the market value, this will pay off the reverse mortgage, and you will receive the remaining equity.  So, in essence, it would be as if you are receiving some of the money out of your home now by using a reverse mortgage, and you will receive the remaining home equity when you sell the home, if you choose to sell.

If my home needs repairs will I need to fix my home before getting a reverse mortgage?

No.  The appraiser will determine if any FHA required repairs will be needed in your home.  Cosmetic repairs are not of any concern to the FHA.  If a repair is needed, you will simply have to provide an estimate to us, and the work can usually be done after you receive your money.  The bank will put aside some money, out of the proceeds, for the repairs so they can pay the repairman after he finishes the job.  This helps so you won’t have to pay any money out of pocket for repairs.

How long have Reverse Mortgages been in existence?

Reverse mortgages became a government-run program in 1989.  Since them they have gained in popularity as people learn the facts.

Can I receive more money from an equity loan?

Possibly, if you qualify; however, you will have a monthly mortgage payment.   Also, many senior citizens don’t qualify for an equity loan, at least not a large equity loan, because of fixed incomes and credit issues.  Anyone at least 62 years old, who is considering an equity loan, should really take out a reverse mortgage, which is an equity loan that never requires a monthly payment.

So, I receive between 40% to 75% of my home’s appraised value;  I can live in my home for the rest of my life;  I make no house payments;  I pay no income tax on the reverse mortgage proceeds;  and my children can inherit my home?  This sounds too good to be true.  Are there any drawbacks to a reverse mortgage?

Not to senior citizens. Your heirs will not receive the total value of your home when you pass away because the mortgage will have to be paid when you pass away. That would also be true if you have a conventional mortgage.

If you have any questions about reverse mortgages (or any type of mortgage for that matter) don’t hesitate to CONTACT US and we will get back to you ASAP!!!!!

USEFUL TECHNOLOGY FOR SENIORS

I just wanted to share some good information I found about some fantastic new products for senior citizens.  As seniors are living longer and longer these days, it makes sense that there are new technologies being created to help enhance and support independence.

1. PRESTO – Presto is a service that does not require a computer to use, but allows you to print email messages or photos to your own special printer.  If you want to learn about what’s going on in your childrens, grandchildrens, or friends’ lives, then Presto is great.  Just ask your son or daughter about it, or you can always visit www.presto.com for more details!
2. Skype – Skype is a free phone service with video capabilities that makes calls through use of your computer.  This means that free calls can be with anyone in the world as long as you both have the free program loaded on your computer.  My daugher recently lived in London and on our computer screen we were able to see our five year old grandson pull his first baby tooth.  We shared his joy about his first upcoming visit from the tooth fairy.  All you need is a computer with a web cam (most new computers have them built in) or you can purchase one and attach it to your computer).  With Skype you can see your grandchildren while you talk to them.  Just download the program for free at www.skype.com
3. Jitterbug – Jitterbug is a call phone designed specifically for seniors with a large LCD screen, a large keypad, and a low monthly fee.  Check it out at www.jitterbug.com.

SAFETY TIPS FOR SENIORS

Safety is one of the biggest concerns for seniors and their children or caregivers.  Here are a few safety precautions that will help make your home a safer place:

1. Clear your floors of all small objects such as bathroom scales or doorstops, to reduce the risk of slipping or tripping.
2. Remove throw rugs.
3. Install additional cordless phone to avoid tripping over long extension cords.
4. Avoid wearing loose or floppy slippers or shoes.
5. Check all stairs and thresholds for loose hardware or carpet.
6. Since most falls occur on the bottom step of stairs, make that step highly visible by painting it a different color or ensuring that it is well lit.
7. Hole onto railings, or install railings if you don’t have them already.
8. Keep a lamp beside your bed so you don’t stumble in the dark.
9. To prevent dizziness when you first get out of bed, sit and dangle your feet for a moment before standing up.
10. Use electric heating pads with caution; you may misjudge the heat.
11. Check the bathroom.  Put adhesive-backed rubber strips in the tub or shower to prevent slipping.  Buy soap on a cord and hang it around the faucet or your neck.
12. In the kitchen, do not reach across a hot burner.
13. Have a large, easy-to-read list of emergency numbers, including fire, police, relatives and friends, near the telephone.

Well, that’s all for now.  Until next time don’t forget to stop and smell the roses!

- Bruce Parris – Reverse Mortgage Advisor – 214.783.2235

If you have any questions about Reverse Mortgages, or if there is any way we can help you in your home search, please don’t hesitate to CONTACT US and we will get back to you asap!

The truth is, a reverse mortgage can offer extremely beneficial assistance (monetarily) to a senior who may be out of options or who is just strapped for cash. But what exactly is a Reverse Mortgage?  How do they work?  What are the requirements for obtaining one?  All of these questions will be answered in the following guide.

In the most basic sense, a reverse mortgage is a special type of loan that lets you convert a portion of the equity in your home into cash. What this means is, the money you have built up over the years by making home mortgage payments can essentially be paid back to you. This is different than a traditional cash-out refinance or home equity loan because there is no repayment required until you no longer use the home as your primary residence. You can even choose whether to be paid all at once, in regular monthly advances, or in increments and amounts that you choose! Yippee!

To further explain, here are some of the most frequently asked questions and answers about Reverse Mortgages.

• Who can qualify for a reverse mortgage?

Seniors 62 years of age or older may qualify. There are virtually no income limits or qualifications you need to meet (even in regard to your credit).

• What kind of houses are eligible for a reverse mortgage?

The main establishing criteria for a reverse mortgage is making sure that the home in question is the borrowers primary residence (where you live most of the year). Primarily, reverse mortgages are taken on single family, one-unit homes. Some programs will also accept two-to-four unit buildings, as long as they are owner-occupied. Other programs even offer reverse mortgages on condominiums and manufactured homes, as long as they are built after June of 1976. Typically, mobile homes and cooperatives are not eligible for a reverse mortgage. Feel free to CONTACT US if you are interested in seeing if your home qualifies for a reverse mortgage.

• What fees will I run into if I decide to get a reverse mortgage?

Typically a reverse mortgage will have an origination fee, third party closing costs (such as an appraisal, escrow fees, and title insurance), and a monthly servicing fee. Whats good, though, is that these charges can be paid from the proceeds you receive from the reverse mortgage, which results in no immediate burden to you as a borrower (the costs are added to the principal and paid with interest when the loan becomes due).

• Is it true that if I got a reverse mortgage then the lender would end up owning my home?

This is definitely not true. Being as the borrower, you will still automatically retain the title to the property. The reverse mortgage lender is merely extending a loan to you. That being said, because you still retain title as a homeowner, you will remain responsible for paying such things as the hazard insurance, property taxes, and any maintenance required to keep the home in a livable condition.

• Does how much money I make (or don’t make) influence my ability to obtain a reverse mortgage?

No way! Since you won’t be required to make a monthly mortgage payment, there are (hence) no income qualifications!

• Can the bank take my home away if I outlive my reverse mortgage?

Absolutely not.  Your loan isn’t even due at that time either.  In fact, as long as you or another borrower (ie spouse) continue to live in the house as your primary residence (and you keep current on your taxes and insurance), you won’t need to repay the loan.

• Are there any stipulations or requirements in regard to how I use the money I receive from a reverse mortgage?

Nope.  You can you the money you receive for virtually anything under the sun (as long as you can afford it). This includes home improvements, health care expenses, vacations, groceries, etc, etc, etc. For many people, the funds received from a reverse mortgage are used to provide somewhat of a security blanket in case unexpected expenses arise.

• I still owe money on my existing mortgage.  Can I still get a reverse?

Of course.  You may be eligible to receive a reverse mortgage even if you still owe money on a first or second mortgage.  Actually, the funds you receive from the reverse can even be used to pay off whatever existing mortage you have!

• What are the main advantages of getting a reverse mortgage?

There are many actually, but here are some of the most significant:

1. A reverse mortgage lets you keep your independence by allowing you to remain in your home and retain home ownership.
2. There are NO monthly mortgage payments required. You are not required to pay back the loan or make any monthly mortgage payments until you permanently move out of the home.
3. Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free and will not affect your Social Security or the benefits you receive from Medicare.
4. Freedom and flexibility. You are free to use the money from a reverse mortgage in any way you choose or deem necessary.

Do you have a question or comment for us about Reverse Mortgages?  Feel free to comment below or CONTACT US if you want to ask anything specific!

- Pate