- 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.
- What is a Reverse Mortgage?
- Who can get a Reverse Mortgage?
- How can I receive my money?
- Are there restrictions on what I can do with the money?
- How much money can I get?
- Where can I find a Reverse Mortgage lender?
- What kind of Reverse Mortgage products are available?
- How much does a Reverse Mortgage cost?
- You, and any other current owners of your home, must be aged 62 or over, and live in your home as a principal residence
- Your home must be a single-family residence in a 1- to 4-unit dwelling, a condominium, or part of a planned unit development (PUD). Some manufactured housing is eligible, but cooperatives and most mobile homes are not.
- Your home must meet HUD’s minimum property standards, but you can use the HECM to pay for repairs that may be required.
- You must discuss the program with a counselor from a HUD-approved counseling agency.
- You allow the property to deteriorate, except for reasonable wear and tear, and you fail to correct the problem.
- All borrowers permanently move to a new principal residence.
- The last surviving borrower fails to live in the home for 12 months in a row because of physical or mental illness.
- You fail to pay property taxes or hazard insurance, or violate any other borrower obligation.
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Reverse Mortgages: Top 10 Things HUD Wants You To Know
Many seniors are searching for more information about reverse mortgages and with the FHA-insured HECM Reverse Mortgage, FHA has done a nice job of putting some information out on their website about it.
Here is an parahprased list of the top 10 things HUD wants seniors to know about the HECM Reverse Mortgage program:
Top Ten Things to Know if You’re Interested in a Reverse Mortgage
1. What is a reverse mortgage?
A reverse mortgage is a type of FHA-insured loan that allows seniors to turn their home equity into cash. The equity can be paid to you in various ways (a lump sum, in payments or a line of credit) and you don’t have to pay it back until you no longer live in the home as your principal residence.
FHA’s reverse mortgage program provides these benefits and is also federally-insured so you won’t have to worry about any bank failures impacting your payments.
2. Can I qualify for a HUD reverse mortgage?
The FHA reverse mortgage program requires that you live in your home, have equity in your home and are age 62 or older. Credit scores, income or assets are not taken into account when qualifying for a reverse mortgage. Prior to closing, you will also need to attend a counselling session with an FHA approved counselor (aproximately an hour) who will be available to answer any questions you have about a reverse mortgage.
3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?
Yes. It doesn’t matter what kind of mortgage you currently have on the house - or no mortgage at all.
4. What types of homes are eligible?
First, you must live in the property as your primary residence. Second, your home must be a single family dwelling or a two-to-four unit property. 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?
In order to qualify for a home equity loan, you will need to have sufficient income, assets and credit scores. With a reverse mortgage, you can qualify as long as you are 62 or older, live in the property and have significant equity in the property.
If you select the “line of credit” option with a reverse mortgage, both a reverse mortgage and a home equity line of credit will allow you access to your money in much of the same way.
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.
9. Should I use an estate planning service to find a reverse mortgage?
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.
In order to get an FHA-insured reverse mortgage, you will need to work with an FHA approved lender and counselor. No estate planning services should be needed.
10. How do I receive my payments?
There are five options to receive your money. The most popular choices are probably “tenure” and “line of credit” and the least popular is “lump sum” because getting a lump sum can often lead to a loss of medicaid eligibility.
The five options are:
Arizona FHA Reverse Mortgages - 5 Myths About Reverse Mortgages
For better or worse, there is quite a bit of mis-information about reverse mortgages in general and like it or not, more and more people are asking the question of “is a reverse mortgage right for me?”
Here are 5 of the most common myths about reverse mortgages:
Top Five Myths About Reverse Mortgages
Myth 1. - The bank takes the house OR the borrower can lose the house.
With a reverse mortgage, the borrower retains title to the home throughout the life of the reverse mortgage. The borrower cannot, as a result of the reverse mortgage be forced out of his or her home, as long as property charges, such as taxes and insurance, are paid and the home is maintained in reasonable living condition.
Once the last borrower permanently moves out of the home, the loan must be repaid. Most properties secured by reverse mortgages still have equity when a maturity event occurs and therefore the borrower or his/her heirs choose to sell the home to repay the loan and preserve this equity for the benefit of the borrower or his/her estate.
Myth 2. - The home must be paid off or be debt-free to qualify for a reverse mortgage.
Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.
Myth 3. - When a reverse mortgage becomes due, the bank sells the home.
The borrower is in control of the home and retains title, not the bank or lender. So while it’s common for the borrower or the heirs to sell the home to repay the loan, it’s a decision the borrower or his heirs make. The borrower or the heirs might also refinance the home in order to repay the loan.
Myth 4. - It’s cheaper to move to a smaller house.
While this strategy might be right for different reasons, seniors need to analyze their costs carefully before making this assumption. The process of selling a home and moving into a new home can be expensive. The typical real estate commission of 6% on a $300,000 home would be $18,000. Add moving costs, and the undertaking to find a new home and the decision is not as simple.
Myth 5. - Children want the home or don’t feel comfortable with a reverse mortgage.
Seniors are encouraged to talk with their children about reverse mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children’s education. Often, the children of many seniors are happy that their parents have a financial solution available to help them live more independently and financially secure.
Source: Financial Freedom
Arizona FHA Reverse Mortgages - Ten Reasons Seniors Choose A Reverse Mortgage
Lately, we have been talking to more and more people who are interested in learning more about the FHA Reverse Mortgage program.
With more people turning 62 every day, the number of people who are getting a reverse mortgage is expected to increase substantially over the coming years. What are the top 10 reasons that seniors get a reverse mortgage? According to AARP:
Top 10 Reasons Seniors Get A Reverse Mortgage
1. Pay off mortgage (20%)
2. Home repairs/improvements (18%)
3. Improve quality of life (14%)
4. Everyday expenses (10%)
5. Emergencies/unexpected (9%)
6. Pay off non-mortgage debts
7. Health or disability (5%)
8. Property taxes/insurance (5%)
9. Financial help to family (2%)
10. Investments, annuities, or long-term care insurance (1%)
Maybe it is because the baby boomers are starting to enter their retirement years, maybe it is because FHA is doing a better job of marketing the FHA reverse mortgage program to seniors, I don’t know… but according to the latest statistics from National Reverse Mortgage Lenders Association, as of June 2008, FHA-approved Mortgage Lenders have originated Reverse Mortgages for 73,875 for homeowners age 62 and older. In the month of October, the total number of people who got an FHA-insured reverse mortgage was up 6.6% from September to 10,121.
Clearly, the FHA-insured reverse mortgage program is growing as America’s demographics shift toward their “golden years”.
Reverse Mortgage Fees To Decrease Starting November 1
For seniors who are interested in getting a reverse mortgage, starting November 1 they will be able to access more money and pay lower fees thanks to housing legislation passed earlier this summer.
The vast majority of seniors age 62 or older (90%+) who get a reverse mortgage go through the FHA Home Equity Conversion Mortgage (HECM) program. Prior to November 1, seniors could borrow against the lesser of either their home’s value or a limit that ranges from $200,000 to $362,790, depending on location.
But effective November 1, the limit is slated to rise to $417,000 nationwide under the new rules which means that seniors will be able to access more of the equity in their home and turn it into cash.
Another benefit of the recent legislation changes is that seniors who borrow more than $200,000 will pay less in fees when going through the FHA HECM program. Homeowners currently pay a 2% origination fee on HECM reverse mortgages and under the new law, they will pay 2% on the first $200,000 and 1% on the rest with the total origination fees not to be more than $6,000.
Who is should consider a reverse mortgage?
According to Susan Wachter, a professor or real estate at the University of Pennsylvania’s Wharton School of Business:
“There is a niche household a reverse mortgage is exactly right for and that person knows they want to stay in their home until death, and they really need the cash to allow them to do so.”
Arizona Reverse Mortgages Are Becoming More Popular
Many people who are retired or are planning to retire soon have seen the $2 trillion loss in retirement savings over the past 15 months influence their planning for their golden years.
We have a seen an increase in the number of people right here in Arizona who are interested in whether or not the FHA Reverse Mortgage Program (aka the FHA Home Equity Conversion Mortgage program) is a valid option for them.
A reverse mortgage isn’t for everyone, but if interest is any indication, more and more people seem to be evaluating this as a possible solution to help them meet their monthly obligations during their retirement years.
Highlights of the FHA Reverse Mortgage Program
Borrower Requirements:
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Age 62 years of age or older |
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Own your property |
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Occupy your property as primary residence |
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Participation in a consumer information session given by an approved HECM counselor |
Mortgage Amount Based On:
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Age of the youngest borrower |
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Current interest rate |
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Lesser of appraised value or the FHA insurance limit |
Financial Requirements:
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No income or credit qualifications are required of the borrower |
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No repayment as long as the property is the primary residence |
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Closing costs may be financed in the mortgage |
Property Requirements:
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Single family home or 1-4 unit home with one unit occupied by the borrower |
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HUD-approved condominiums |
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Manufactured homes and leased land |
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Meet FHA property standards and flood requirements |
Learn more about FHA Reverse Mortgages on HUD’s website or call us directly!
The Housing and Economic Recovery Act of 2008 — Arizona Reverse Mortgage Law Changes
If you are a senior living in Arizona and considering a reverse mortgage, be sure to thank the new housing law for increased options, flexibility and lower fees to get into a reverse mortgage. Some of the big changes in the bill include new loan limits for reverse mortgages, reduced costs to obtain a reverse mortgage and some protection from predatory sales practices.
New loan limits for reverse mortgages
The new maximum amount for a reverse mortgage has been upped nationwide to $625,500 — which replaces the old limits which ranged from 200,160 - 362,790 depending on where the borrower lived. Quite simply, seniors can now borrower more than $250,000 more than they could before the bill passed.
Reduced costs to obtain a reverse mortgage
With the passing of the bill, origination fees are reduced to 2% on the initial $200,000 and 1% on the remaining balance with a cap of $6,000. So as an example, if you take out a $400,000 reverse mortgage you will now pay $6,000 where under the old law, you would pay $8,000.
Protection from predatory sales practices
Loan officers who help people obtain reverse mortgages are now prohibited from selling other financial and insurance products. The law also prohibits tying the purchase of insurance or other financial products to taking out a reverse mortgage. Now if you are shopping for a reverse mortgage, you can be assured that you will only end up with a reverse mortgage and not a reverse mortgage and a portfolio of other financial products at the same time.
Do you live in Arizona and considering a reverse mortgage? Are you interested in learning more about how an Arizona reverse mortgage could benefit you? Call us — we are Arizona reverse mortgage specialists — or — you can start here.
Common Questions and Easy Answers About Reverse Mortgages
I was poking around on the Internet the other night and came across a site about reverse mortgages that was aimed at collecting information from seniors so that one of their sales people could call them and end up trying to sell them a reverse mortgage.
The interesting thing about this site is that their “hook” was “get your free booklet if you give us your information”. They even let you “preview” the booklet by showing you the first 2 or 3 pages of it.
I almost thought about filling out my information so I could actually see the rest of the booklet — and then it dawned on me… I bet I could find these for free!
Enter NRMLA — the National Reverse Mortgage Lending Association (yes, my company is a member).
On the NRMLA site, there is quite a bit of information for both people in the industry as well as consumers — and in about 30 seconds, I found the booklets. The booklets do a nice job of answering some of the most common questions about reverse mortgages — such as:
To see all of the free booklets available from the NRMLA, here is the link!
The FHA Reverse Mortgage Program
From Sun City to Sun Lakes — more and more people in Arizona are turning 62 every day. As the baby boomer generation reaches retirement one home financing option has become more popular than ever — The Reverse Mortgage.
Have you or a loved one considered a reverse mortgage?
Are you intrigued by what you hear about them, but afraid that it sounds just too good to be true?
You’re not alone, it seems that I have had more and more people asking me lately about what reverse mortgages are and how they work — because getting the right reverse mortgage set up can give a much needed lifeline to seniors who may be struggling to make ends meet every month.
How does a reverse mortgage work?
A reverse mortgage is a loan that eliminates your monthly mortgage payment and uses the equity built up in it to give the homeowner a monthly income, a line of credit, or cash at closing to pay off bills, or any combination of the above.
There are many different types of reverse mortgages but in my opinion, none as good as the FHA backed Reverse Mortgage — which is also called “The Home Equity Conversion Mortgage” or HECM for short.
This program has become more and more popular due to the increase in home prices (equity available) over the last decade and the aging demographics of America.
FHA HECMs Versus Other Reverse Mortgages - What’s better?
HECM loans generally provide the largest loan advances of any reverse mortgage. HECMs also give you the most choices in how the loan is paid to you, and you can use the money for any purpose. For example, you can take the money in a lump sum, you can take it and put it on a credit card (which pays you interest) and draw on the money anytime you would like or you can take the money in monthly installments.
The FHA tells HECM lenders how much they can lend you, based on your age and your home’s value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations. Lenders can always give you the maximum cash available to you.
To be eligible for a HECM loan:
Questions about Repaying a Reverse Mortgage and in particular the HECM?
One common question I get when talking about reverse mortgages is “when/how do I have to repay the reverse mortgage?”
As with most reverse mortgages, you must repay a HECM loan in full when the last surviving borrower dies or sells the home. There are also a few other scenarios that may happen where it may become due such as:
As always, I am available for any other questions you may have about HECMs or any other FHA financing.
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