Reverse Mortgage Blog - Every you need to know about reverse mortgage.

Deciphering Reverse Mortgage Cost: Closing Costs

Other closing costs that are commonly charged to a reverse mortgage borrower, include: -Credit report fee. Verifies any federal tax liens, or other judgments, handed down against the borrower. Cost: Generally under $20 - Flood certification fee. Determines whether the property is located on a federally designated flood plane. Cost: Generally under $20 - Escrow, Settlement or Closing fee. Generally includes a title search and various other required closing services. Cost: $150-$450 - Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items. Cost: $75-$150 - Recording fee. Fee charged to record the mortgage lien with the County Recorder's Office. Cost: $50-$100 - Courier fee. Covers the cost of any overnight mailing of documents between the ... Full Story

Drawbacks Of Reverse Mortgage

A reverse mortgage borrower may encounter many financial hazards in taking out a reverse mortgage. First, reverse mortgages are very expensive while promising an uncertain amount of benefits. For example, a typical reverse mortgage may provide to the consumer a $300 per month payment with a monthly compounded interest rate of 1%. Over the course of ten years, the borrower will receive $36,000, but by that time she will owe almost $70,000-almost twice as much as she has received. In addition, reverse mortgages have complex contract terms that are confusing and can greatly impact the overall cost of a reverse mortgage to the borrower. This report examines the effect of some of these terms on some California reverse mortgage borrowers and looks at the danger ... Full Story

9 Steps To Get Reverse Mortgage

ReverseMortgage.org's cartoon is a good start to decipher the mysterious world of getting a reverse mortgage.

"1. Awareness Homeowner learns about reverse mortgages from a news article, advertisement, word-of mouth, etc. 2. Upfront Education Homeowner contacts a reverse mortgage lender or the National Reverse Mortgage Lenders Association to learn more about reverse mortgages. 3. Counseling Homeowner seeks counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), or Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone. By law, a counselor must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health and financial alternatives; (ii) other home equity conversion options that are or may become available to the ..." Full Story

Deciphering Reverse Mortgage Cost: Origination Fee

The origination fee covers a lender's operating expenses—including office overhead, marketing costs, etc.—for making the reverse mortgage. Under the HECM program, which accounts for 90 percent of all reverse mortgages made in the U.S., the origination fee is equal to the greater of $2,000 or 2 percent of the maximum claim amount (i.e., county FHA loan limit). Currently, the FHA loan limit varies from a low of $200,160 (for rural areas) to a high of $362,790 (for high-cost metropolitan areas). Therefore, the 2 percent origination fee generally ranges between $4,003 (2 percent of $200,160) and $7,256 (2 percent of $362,790). Home Keeper borrowers are charged an origination fee that may not exceed 2 percent of the value of the home. With either product, the entire ... Full Story

Deciphering Reverse Mortgage Cost: Appraisal Fee

An appraiser is responsible for assigning a current market value to your home. Appraisal fees generally range between $300-$400. In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety codes, in order for the reverse mortgage to be made. If the appraiser uncovers property defects, you must hire a contractor to complete the repairs. Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. The cost of the repairs may be financed in the loan and completed ... Full Story

Deciphering Reverse Mortgage Cost: Mortgage Insurance Premium

Under the HECM program, borrowers are charged a mortgage insurance premium (MIP), equal to 2 percent of the maximum claim amount, or home value, whichever is less, plus an annual premium thereafter equal to 0.5 percent of the loan balance. The MIP guarantees that if the company managing your account – commonly called the loan “servicer” – goes out of business, the government will step in and make sure you have continued access to your loan funds. Furthermore, the MIP guarantees that you will never owe more than the value of your home when the HECM must be repaid. Full Story

Reverse Mortgage FAQ: Payment Options In HUD Reverse Mortgage

You have five options: - Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. - Term - equal monthly payments for a fixed period of months selected. - Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted. - Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home. - Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower. Full Story

Reverse Mortgage FAQ: Difference Between A Reverse Mortgage And A 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 ... Full Story

How Can You 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. Full Story

Typical Costs and Interest Rates of Reverse Mortgage

The cost of getting a reverse mortgage from a private sector lender tends to exceed the costs of other types of mortgage or equity conversion loans. Exact costs however are dependant on the particular reverse mortgage program that the borrower aquires. For the most common type of United States reverse mortgage, the HECM (Home Equity Conversion Mortgage), there is an insurance premium of 2 percent of the loan and a 2 percent origination fee in addition to normal closing costs, which are typically some thousands of dollars, but vary depending on the third-party costs (appraisal fees, title searches, etc.) that must be undertaken. Thus a $200,000 loan would have $8,000 in costs beyond the normal closing costs added onto the loan at the outset. Other ... Full Story

Top 10 Things You Should Know About Reverse Mortgage

Laura Coffey highlights top 10 things you should beware before you jump on the reverse mortgage bandwagon.

"1. Your age matters. For most reverse mort-gages, a borrower must be at least 62 and must live in the home as a principal residence. Generally, the older you are and the more valuable your home is, the more money you can tap. 4. Choose a payment preference. The loan can be paid to you in three ways: as a lump sum, in regular monthly or quarterly installments or as a line of credit you can tap as needed. 5. Know your responsibilities. Borrowers are responsible for property taxes, insurance and home repairs. Your loan could become due and payable in full if you fail to meet those responsibilities. 6. Get free help. Don't sign a service agree-ment with anyone who promises to help you ..." Full Story

When You Shouldn't Consider Reverse Mortgage

National Consumer Law Center's publication on reverse mortgage tips can be seen as a warning to many who are not suitable for the expensive and complex product.

"• The costs of obtaining a reverse mortgage can be very high. You may have to pay some of these costs in cash. However, most lenders allow a portion of these costs to be financed as part of the loan balance. In addition, interest, insurance and service charges will be added monthly to the loan balance. Thus, the amount you owe the lender increases over time. • The amount of the loan may not meet your current and future needs. For example, a 65-year old with $50,000 in home equity who wanted a reverse mortgage as a monthly income supplement may get as little as $100 per month on a term mortgage. • Beware of reverse mortgage scams! For example, some senior homeowners have been ..." Full Story

Three Types of Reverse Mortgages

FTC offers a candid introduction of the three reverse mortgage types: single-purpose reverse mortgages, federally insured Home Equity Conversion Mortgages (HECMs), and proprietary reverse mortgage from private lenders. Good reading!

"The three basic types of reverse mortgage are: single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD); and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them. Single-purpose reverse mortgages generally have very low costs. But they are not available everywhere, and they only can be used for one purpose specified by the government or nonprofit lender, for example, to pay for home repairs, improvements, or property taxes. In most cases, you can qualify for these loans only if your income is low or moderate ..." Full Story

House-Rich and Cash-Poor? Reverse Mortgage May Be Good For You.

Terry Savage argues that if you have too much capital gains in your home that exceed what the generous tax-free clause offers ($250,000 for an individual and $500,000 for a couple if you meet certain conditions), you may want to take out a reverse mortgage. Unfortunately, this is not a sound suggestion. Reverse mortgage usually carries astounding price tag in terms of closing cost or "hidden fees." A better option for home-equity millionaires is to take out a standard home equity loan or home equity line of credit (HELOC).

"If you're like many Americans, your house is your largest single asset, and it's been appreciating at a rate that probably outstrips your investment portfolio. In fact, your home might represent a good portion of your retirement fund. But, can you afford to sell, and then retire? You can no longer be certain that you can avoid capital-gains tax when you sell a house and move. Under the current rules, every time you sell your house, you could owe taxes. Single filers can exclude $250,000 of gains on every sale, and married taxpayers filing jointly can exclude $500,000. You can take that deal every two years. But what about those who stayed put for many years and watched their homes soar in value? Even a ..." Full Story

Reverse Mortgage: The Cost Rundown

Buyer's beware: reverse mortgage will carry a much higher closing cost than a typical home equity loan. You can easily pay 4-5% of the loan principal before you get a dime. (And that's why the government will require you take a mandatory consultation session before you sign the dotted line.)

"Origination Fee The origination fee covers a lender's operating expenses—including office overhead, marketing costs, etc.—for making the reverse mortgage. Under the HECM program, which accounts for 90 percent of all reverse mortgages made in the U.S., the origination fee is equal to the greater of $2,000 or 2 percent of the maximum claim amount (i.e., county FHA loan limit). Currently, the FHA loan limit varies from a low of $200,160 (for rural areas) to a high of $362,790 (for high-cost metropolitan areas). Therefore, the 2 percent origination fee generally ranges between $4,003 (2 percent of $200,160) and $7,256 (2 percent of $362,790). Home Keeper borrowers are charged an origination fee that may not exceed 2 percent of the value of the home. With either product ..." Full Story

Reverse Mortgage Is Tax-Free, But Sometimes Not Tax Deductible

The tax impact of a reverse mortgage is tricky. The loan itself is tax-free, means you don't pay tax for the amount you borrow. Plus, since reverse mortgage is a form of home equity loans, you are also entitled to deduct some interest too. However, if you borrow more than $100,000, not all your interest expense is deductible.

"Income Taxes The money you receive from a reverse mortgage is considered a non-taxable loan. You can deduct the interest on a reverse mortgage when you actually pay it, that is, when the loan is paid off. Since reverse mortgages are home equity loans, you can deduct interest only for loan amounts up to $100,000. Thus, if the loan balance is more than $100,000 when the mortgage is paid off, not all of interest will be deductible. " Full Story

Reverse Mortgages: More Money for the Elder

Jeff Brown from Knight Ridder Newspapers discussed the dynamics of reverse mortgage. Because the total money owed in a reverse mortgage loan can in no case exceed the value of property, lenders usually will put a fat margin between the home equity and the money one can borrow. It makes the reverse mortgage products as an insurance for your longevity.

"The longer you have the loan, the more interest you would owe. But federal regulations limit the total amount owed to the value of the property. If the property value falls or if the homeowner lives to be very old, interest charges or money received on the monthly payment plan can exceed the property's value. That, of course, is a risk that worries lenders. To reduce this prospect, they limit the initial loan amount, considering factors such as interest rates and the homeowner's life expectancy. (If you have a previous loan on the property, a portion of the reverse mortgage must be used to pay that off.) Hence, the older you are, the more money you can get. A 62-year-old with a $150,000 home might ..." Full Story

Is a Reverse Mortgage Right for You?

About Retirement Planning has a step-by-step walkthrough of the reverse mortgage process. If you haven't paid attention, you have a ton of flexibility in deciding how you will get the proceeds. Be very careful since some decisions may affect your eligibility in certain government assistance programs.

"1. When applying for a reverse mortgage, all owners must apply and sign the papers. The applicants must be at least 62 years old, own the home, and must generally live in the dwelling. One note though, mobile homes are usually not eligible for reverse mortgages. 2. A borrower must seek counseling from a HUD approved counceling agency prior to applying for a reverse mortgage. This counseling is mandatory. During this meeting, the process is explained and a determination of eligibility is made. 3. A borrower can request regular monthly payments, a credit line, or a lump sum distribution of cash. A combination of these payment plans can also be requested. 4. Typically, a reverse mortgage loan requires no repayment for as long as you ..." Full Story

How Reverse Mortgage (RM) Will Affect Your Medicaid

Yes, improper usage of reverse mortgage proceeds will affect your eligibility for Medicaid. You may want to spend proceeds immediately, or the remaining proceeds, which are considered part of your assets, will affect your Medicaid enrollment.

"Will I Lose My Government Assistance If I Get a Reverse Mortgage? A reverse mortgage does not affect regular Social Security or Medicare benefits. However, any reverse mortgage proceeds that you receive must be used immediately. Any funds that you retain would count as an asset and could impact Medicaid eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset. If the total liquid resources (including other bank funds and savings bonds) exceed $2,000 for an individual or $3,000 for a couple, you would be ineligible for Medicaid. To be safe, you should contact ..." Full Story

ABC offers ABC of Reverse Mortgage

ABC News gives an overview of reverse mortgage. Potential borrowers: beware that taking a reverse mortgage may affect your eligibility of Medicaid and other government assistance programs.

"Before your parents make a decision, it is important to understand what a reverse mortgage is, as well as its advantages and disadvantages. A reverse mortgage is a loan that allows homeowners 62 years of age and older to borrow against the equity in their homes without having to sell the home, give up the title or take on a new monthly mortgage payment. This type of loan is tax-free and need be repaid only when the last borrower dies, sells the home or moves away permanently. At this time, the loan must be repaid in full, including all interest and other charges. ... Advantages and disadvantages of reverse mortgages: There are several advantages to a reverse mortgage. For starters, the money received from a ..." Full Story

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