During the refinance boom of the last couple of years many seniors refinanced their mortgages to low adjustable rate mortgages or took cash out on fixed rate loans. Many lenders are now finding that some seniors that have refinanced in recent years cannot afford the monthly payments. Some are due to the rate increasing on the ARM loan and others due mostly to declining incomes in their retirement years. While that scenario also has been the path taken by younger borrowers, seniors at least have the option of considering a Wisconsin reverse mortgage instead of a “forward” mortgage. With this option it may be feasible to avoid losing the house due to a foreclosure and also making sure that no more problems like this arise in the future. Without a payment due and payoff of many debts possible, it will make seniors budgeting a lot easier.

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 2008, 78 million baby boomers will turn age 62 and qualify for a reverse mortgage. These seniors have 4 trillion dollars in home equity available to them in an illiquid asset, their house. In fact, these retirees have 50% of their net worth tied up in their homes. Estimates indicate that there is a target population of some 15 million senior households that both qualify for and are good potential candidates for the Department of Housing and Urban Development’s home equity conversion mortgage (HECM)program. The HECM is when a lender advances, a senior age 62 or older and a current homeowner, money based on the houses equity. The senior homeowner can take the cash as a monthly payment all at once in a single lump sum of cash, as a regular monthly loan advance or as a credit line that lets you decide how much cash to use and when to use it. You may choose any combination of these payment plans also. The senior homeowner is not required to make any payments on the loan so long as he or she remains in the house. The lender collects the overall loan balance–which includes the accrued interest charges and other servicing charges as well as the amounts paid out to the senior when the house is sold or the owner dies.

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.

What can a senior do to avoid stock market dips or inflationary price increases? I am asked pretty regularly if I can provide help for a mother or father whose savings has taken a hit and the golden years are anything but that to them. There is a strategy that some seniors employ that can help deal with a challenge like this. It can free up discretionary income, eliminate a mortgage payment, and provide some liquidity so they don’t have to use their retirement funds.

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.

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) or Federal housing Administration (FHA); 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. 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.

With the recent wave of Wisconsin Reverse Mortgages happening there is a lot of misinformation out there. I have heard of some really bad reasons not to take out a reverse mortgage and decided it was time to write about some of them. Please remember reverse mortgages aren’t for everyone but make sure the reason you aren’t investigating them is not on this list. If you haven’t even looked at a Wisconsin reverse mortgage for any of these reasons please take another look, it might work for you.

1. When taking out a reverse mortgage I no longer own the house my bank does. This is untrue because you are kept on the title as owner of the property. As a matter of fact the bank can’t foreclose on you like a forward mortgage. You live in the house as long as you can and will always own the property till you decide to sell. like a regular mortgage the bank will place a lien on the house to insure it get paid off but you maintain complete control of the house.

2. My children won’t get anything when I pass. Your estate only owes as much a the mortgage balance is at the time of payoff. The payoff is however much you have spent plus interest. Any equity that is left over is passed on to your heirs. the bank does not get too keep any of this extra equity. As an easy example if you owe 25,000 on the reverse mortgage and the house os worth 125,000 and it was sold. You would get the extra 100,000 not the bank or anyone else. The lender would get paid there 25,000 they have given you.

3. I could get forced out of my home by my bank. FHA/HUD reverse mortgages specifically state that you can not be forced out of your home.

4. Social Security and Medicare will be affected by the money I receive from the reverse mortgage. This money is actually considered a loan and not income. For this reason a reverse mortgage does not lower Social Security or Medicare benefits like some want you to think.

5. I must have really good credit and income to qualify for a reverse mortgage. Actually it is a lot easier to qualify for a reverse mortgage than a forward mortgage that you have had in the past. Since there are no payments you don’t need income to qualify. As for credit the only thing that is looked at is if you are currently going through a bankruptcy you may not qualify. If you have bad credit you will still qualify for a reverse mortgage.

6. My home must be free and clear with no mortgages to be able to get a reverse mortgage. No, you can have a mortgage and still qualify for a reverse mortgage. You will pay off the current mortgage with your new reverse mortgage and will be getting rid of the previous mortgage payment. You must have enough equity to pay the mortgage off completely and you will have to use some of your available cash to do so.

7. There are large out-of-pocket expenses which make it hard for seniors to get the loan. All of the costs, whether closing costs or interest, are financed. That means there are few out-of-pocket expenses at any point in the reverse mortgage.

8. Reverse mortgage interest rates are higher than a regular mortgage. This is just not the case. In most cases the reverse mortgage has a lower rate than the current conforming fixed rate. The HECM product’s interest rate is set by the Federal government.

9. I might “outlive” the loan (don’t we all wish for that?). FHA/HUD reverse mortgages are designed specifically so that you can’t outlive the loan. When you get the reverse mortgage, the lender will charge you 2% to purchase mandatory FHA mortgage insurance. That insurance guarantees that even if you live to be 100, you can never owe more than the value of your home and you can never be forced to leave.

10. A reverse mortgage is like a home equity loan. First, home equity loans may have many requirements such as high income, low debt, and good credit that a reverse mortgage does not. Second, you can “outlive” a home equity loan and end up being foreclosed on by the bank. This can never happen with a reverse mortgage. Third, a reverse mortgage usually has significantly lower interest rates.

Those were ten of the biggest misconceptions out there about reverse mortgages. I am sure I missed some but the key is get with a good reverse mortgage expert and they will be able to answer your questions. There are many resources that will help educate, I suggest you do some reading!