Reverse mortgages are becoming quite popular among seniors in the United States. Gone are the wild west like days of originating reverse mortgages. As they started to become more popular the federal government stepped in to regulate them and protect seniors from abuse. These safeguards are regulated by the Federal Housing Administration (FHA) and it’s HECM product is the premiere reverse mortgage.

Here is a list of the safeguards available when a senior takes out a reverse mortgage:

1)- Independent counseling – Before an application can be processed, the borrower must first meet with an independent certified counselor. HUD and AARP have lists of impartial third party counselors whose jobs are to help seniors in the process .

2)- Standard & Capped Rates – Depending on the specific reverse home loan you have, they may have a life-time cap and a periodical rate cap to make sure that a sudden increase in interest rates doesn’t affect you negatively. Also more recently there has been a fixed rate reverse mortgage which takes away any of that worry.

3)- Limit on fees being charged – Origination fees are capped and can not surpass a specific percentage of the value of the mortgage.

4)- Advance Disclosure – As a borrower, you are entitled to receive a Total Annual Loan Cost (TALC) disclosure. This disclosure is required by the Federal Reserve Board and it has the information you need to understand the total transaction costs over the life of the home loan.

4)- No maturity date – A reverse mortgage can never be due as long one of the borrowers still reside in the house. You can stay in the house as long as you want if you pay real estate taxes, insurance and other maintenance costs.

5)- No prepayment penalty – When you get a reverse mortgage, you can pay it off at any time with no additional costs. In some limited cases, the reverse mortgage may have a one year prepay so check with your adviser.

6)- Three day grace period – You have three days to change your mind after the loan closes and you can cancel without cost to you.

7)- Home protection – You can never owe more money that the house is worth. You are guaranteed to not leave your heirs with a bill. Your house title is always in your name with the reverse mortgage as a mortgagee only.

8)- No equity sharing – Unlike the old days when you would have to give the equity away there is no equity sharing. The appreciation is yours or your heirs to keep.

* You can use the proceeds from a reverse home loan to pay for high medical bills. Health care costs are enormous in the U.S.A. and medicaid/medicare don’t cover enough

* Your employer let you go before you could qualify for the pension plan. Retirement savings isn’t enough to support you and a part time job may be on the horizon

* You don’t have enough cash flow to do anything fun or something you have wanted to do for a long time.

*You want to afford doing things you haven’t been able to do before because you were too busy performing your obligations.

*Your home needs repairs but you don’t have the money to do them. If you have lived in your house for many years and want to stay there it may need updating, which can cost a lot of money

* Your social security and Medicare payments are not enough.

* You want to buy long-term care insurance.

* Your children need money and you want to help them. Perhaps your grandchildren need help with college expenses and you can fund their education

* You have no heirs or your children are doing well financially and you want to use all the money you have saved

* You want to purchase a vacation home in an area you like or just want to get a small house near your family.

* You retired early and don’t qualify yet for social security payments.

* Your house is in foreclosure and you don’t have enough money to pay what you owe on it. Perhaps the monthly mortgage payment is too much on the budget. How about no mortgage payment?

clipped from rismedia.com When asked the question, “What prompted you to obtain a reverse mortgage loan?” the responses were – Budget too tight - 19% – Need more liquid assets on hand - 16% – Home repairs and maintenance - 15% – Provide care for dependents, pay medical bills - 8% – Pay property taxes and homeowner’s insurance - 7.23% – Falling behind on monthly payments - 6.25% The survey was conducted in January by Consumer Credit Counseling Service of Greater Atlanta, Inc., a credit counseling agency that provides reverse mortgage counseling. The homeowners average 74 years old and have lived in their homes an average of 18.5 years. The average purchase price of their homes was $95,554 and the respondents said that the current value of their homes was approximately $221,997.

As you can see the number one reason seniors get a reverse mortgage is to help out on monthly fixed expenses. Using the money for the wrong purposes like an annuity or life insurance is what has most people upset. With the counseling by HUD approved counselors mandatory, far less abuse of this mortgage product is happening. It is not for everyone though. If you plan to move, want to leave the entire house for children, or will frivolously waste the money, don’t get a reverse mortgage. If you need more information feel free to call me at 414-531-4035 or just e mail me at the contact Dave page.

]]> http://wisconsinreversemortgages.net/22/a/feed/ http://wisconsinreversemortgages.net/20/wisconsin-reverse-mortgage-checklist/ http://wisconsinreversemortgages.net/20/wisconsin-reverse-mortgage-checklist/#comments Fri, 02 May 2008 00:46:48 +0000 debtsolu http://wisconsinreversemortgages.net/wisconsin-reverse-mortgage-checklist/2008

That is a very basic checklist to go through to see if you are a candidate for a reverse mortgage

If you need more questions answered feel free to give me a call at 414-531-4035

It is impossible to keep up with all the new regulations with reverse mortgages. I have tried to give you the basic rules so you understand the program. I recommend that you check a few other sites for help. here are a couple of them that will also help to answer questions

Reverse Mortgages

Wisconsin Reverse Mortgages

Dangers of Reverse Mortgages

According to the United States Bureau of the Census and the National Center for Health Statistics, the older population — persons 65 years of age and older — numbered 35 million in 2000. While the years since the last census have altered the numbers, it showed the over-65 group represented 12.4 percent of the population — about one in every eight Americans. The census data showed nearly 80 percent of the nation’s seniors own their own homes, and 73 percent are owned free and clear of any mortgages, amounting to nearly $1.9 trillion in home equity.

It’s the 27 percent that do not own their homes free and clear that could be at risk. Many of these seniors didn’t expect the raise in gas, food and fixed expenses of everyday life. When I talk to many of these seniors their first response is a reverse mortgage is just for receiving payments. I don’t need the extra income a reverse mortgage provides, I just need my costs to go down. What many people forget is a reverse mortgage can get the current mortgage debt off of your back. For instance you may have an arm that just adjusted and the payments went up a hundred dollars a month. With the proper equity you can pay that off with the reverse mortgage and not have any more payments due while you live in the house. Instead of figuring out how to pay the extra hundred you might have freed up hundreds and avoided losing the house.

In the case of being in foreclosure but living in an equity rich house, you still have the Wisconsin reverse mortgage option. When qualifying for a reverse mortgage credit and income are not considered for approval. Even though the foreclosure probably lowered  your credit score you might still be able to stay in your house and not have any more payments. The key criteria is your equity and age which will determine your lump sum distribution. It is this distribution that pays your delinquent mortgage. There might even be an option of negotiating a lower payoff to make this work as lenders do not want to own a home in this market. I have negotiated many payoffs for up to 20% off the payoff balance. It is vital to get this in writing and give it to your reverse mortgage lender so they know what balance to pay off.

If you are a senior in financial trouble don’t just give up. Search out some options that could help save your house. Find a knowledgeable reverse mortgage expert who can see if you qualify for this type of foreclosure workout. When talking with this individual make sure they have done a foreclosure workout as dealing with that department can be tricky. Good luck in your research. You may call anytime at 262-641-4450 and ask a question.

In the last twelve months annualized 109,000 HECM’s were originated which almost equals the entire amount done the last 10 years. Why has there been such a resistance to this product that seems almost to good to be true? There are some easily discernible reasons that help explain why this loan has had such a low penetration among its senior members. The first and most obvious one is the upfront charges which include FHA mortgage insurance and a two percent origination fee. There are other closing costs involved but all of these costs are financed into the loan with no out of pocket expenses. The whole sub prime mess has many seniors not trusting any loan company out there and are even more skeptical of newer programs like these. There are also some fears that seniors have that make it very hard to step into a Wisconsin reverse mortgage and I will go over some of them next. Needless to say if you can be aware of the many factors that play into this decision making it may be easier for you to objectively look at a reverse mortgage and make a better decision of it’s effectiveness for you.

The fear of losing the equity in your house. Seniors grew up with the American dream of owning a house. They spent their lives focused on making their home free and clear of any liens. Paying off the mortgage was priority number one so it is counter-intuitive to add debt to it. By taking out a reverse mortgage you would be doing a 360 degree turn and actually be growing a mortgage versus paying it off. No matter how much sense a reverse mortgage may seem it will not make sense to a lot of seniors because of how they were financially raised.

Another fear seniors have is the complexity of taking out a Wisconsin reverse mortgage. With the program being so new and so few taken out there is not a whole lot of information available to seniors who are looking for more knowledge. For many people the unknown is the worst of all fears and will cause hesitation in making decisions. That is why HUD requires all seniors to participate in counseling sessions to ensure they understand reverse mortgages and the process of taking out that kind of mortgage. The funny thing about that is the well intended counseling will actually scare off some potential applicants.

A general fear of having flexibility in a seniors retirement years is a concern when making this financial decision. With everything considered a senior who takes out a reverse mortgage should expect to live in the house for at least 3 years if not more depending on age and loan size. Most seniors have an uneasy feeling about the future and sometimes may be unwilling to commit that far. Death, serious illness and similar issues weigh heavily on their minds.

My family wants the house and a Wisconsin reverse mortgage will not allow for this. We will have to sell the house so that the reverse mortgage can be paid off. First and foremost you will have to determine if the kids want the house or they are going to want to sell it. Normally if the kids have families and already live in an nice area they aren’t going to want to move. If they do want the house they can always refinance the house and pay off the reverse mortgage. Remember it is a non recourse mortgage and you can’t own more than its worth. The children will have many options available to them.

Seniors remember way back when these reverse mortgages were first available and the stories that were heard about people who did reverse mortgages. Lets just say stories abound about lenders taking advantage of seniors. It was because of this that HUD started to regulate HECM’s and also insure them. One can argue that these types of mortgages are actually more safe than any other mortgage. when you bought your house or refinanced it did you have to meet a counselor? Most horror stories actually are from seniors taking out a reverse mortgage and using the funds into investments and then losing money. The reverse mortgage is not the fault, it was the advisor who stuck them in a risky fund.

Reverse mortgages are now just coming into the limelight. As with most things in life when they are originally released they have many naysayers. When the 30 year fixed was first brought out it was until many years later that the pundits realized it was a good idea. I expect that it will be a little more time, some more education, and Wisconsin reverse mortgages will also become a mainstay in our senior population.

If you are a senior who wants to live in your own house, a Wisconsin reverse mortgage might be just the ticket relieve some of the financial burdens you are facing. A reverse mortgage can give seniors, age 62 and above, cash, a line of credit, or monthly income. In fact, it is possible you may qualify for all three and no monthly mortgage payment is needed. The money that is received is also tax free which increases your spend able income without the tax drawbacks. The loan is paid back when both of the borrowers permanently move out or pass away. It’s a great way to get some financial security and maybe even live a little more!

Years ago reverse mortgages had some negative thoughts attached to it. However, the department of housing and urban development (HUD) has taken over with many rules and regulations to help stop any fraud. There is a very specific process every senior must go through including a third party counseling for seniors to make sure every senior understands the reverse mortgage process. If a senior does a Wisconsin reverse mortgage they can never lose their house or be kicked out. Another concern seniors may have are costs involved with the reverse mortgage. The fees can be higher due to the fact you may have FHA mortgage insurance premium required to do the loan. These costs are rolled into the loan and you won’t have to spend any out of pocket money on these. To make the loan worthwhile you should expect to be in the house at least three years and preferably five.

There are many reasons clients take out a Wisconsin reverse mortgage. Some need to cover health-care costs and some just want to use the money for day to day expenses because social security isn’t enough.  Others use it for sophisticated financial planning or estate purposes, like a life insurance policy or buying an income property. One could use it to travel the world and would like to spend their money they have earned rather than give it away. I have even had some seniors use the money to send grandchildren to private schools. The key is you can use the money for whatever purpose you decide, the ultimate in flexibility.

Reverse mortgages are a great option for some seniors but not necessarily the correct option for everyone. If you are interested in a Wisconsin reverse mortgage, it is imperative to find someone who knows the ins and outs of reverse mortgages. They can calculate how much money you might be able to receive and give you proper advice for your situation.

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. An excellent example is the city of Madison, WI which allows seniors over 65 with less than 30,000 in income to pay their property taxes with a modified reverse mortgage. In most cases, you can qualify for these loans only if your income is low or moderate.

HECM’s and proprietary reverse mortgages tend to be more costly than other home loans. The up-front costs can be 2% FHA and 2% origination fee plus all the normal fees associated with a mortgage (closing costs). Like a refinance if you plan on being in your house a short amount of time, it may not be worthwile to take out a reverse mortgage. These mortgages are available just about anywhere and have no credit or income requirements. The money you receive either upfront or monthly can be used for whatever you want. There is also the option of getting a line of credit, which provides even more flexibility.

Before applying for a HECM, you must meet with a counselor from an independent government-approved housing counseling agency. The counselor must explain the loan’s costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area. They can’t steer you to a particular lender but can tell you what to expect. In the State of Wisconsin you can do this over the phone if you can’t get to a counseling place.

The amount of money you can borrow with a HECM or proprietary reverse mortgage depends on several factors, including your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.

The HECM gives you choices in how the loan is paid to you. You can select fixed monthly cash advances for a specific period or for as long as you live in your home. Or you can opt for a line of credit, which allows you to draw on the loan proceeds at any time in amounts that you choose.You also can get a combination of monthly payments plus a line of credit.

The last type is the proprietary reverse mortgage, which is a reverse mortgage that is backed and owned by the mortgage company that markets it. Proprietary reverse mortgages are generally the most expensive type. If your home is worth more than the HUD’s 203b limit for your county you may be able to get out more money than with the HECM. if you have a higher appraised value without a large mortgage, then you may likely qualify for greater funds. Location (for example, your neighborhood) is only one part of the determination of appraised value.It is also possible it may be less expansive than an HECM in the early years of the mortgage because the insurance is not required.

As you can see some investigation needs to go into obtaining a reverse mortgage. You must make sure you are financially making the right decision when going with this type of loan program. As always make sure you seek out and expert in Wisconsin Reverse Mortgages who can help answer your questions.