Your home is your nest egg which can often yield money for your retirement. But let's face it. A Reverse Mortgage isn't for everyone. We will cover the Sure, for many seniors they're a perfect fit. "Is a reverse mortgage right for me?", you ask. The following questions can help you ascertain if a Reverse Mortgage will work for you:
• Are you looking to stay in your home for the foreseeable future?
• Would extra money enable you to do the things you want to do?
• If there are two borrowers and one passes away, would you be able to pay your taxes, homeowner's insurance, and keep up the house in the condition it was when you took out your reverse mortgage mortgage?
• Are there medical or in-home care situations you face where a reverse mortgage might make life easier for you?
• Would you like to zero out your existing mortgage and pay no more monthly mortgage payments?
• Would having a Reverse Mortgage make life easier and more satisfying?
If you answered "Yes" to the above questions, perhaps a Reverse Mortgage might be an option worth your consideration. One of the common worries about Reverse Mortgages is concern for your heirs. Discuss Reverse Mortgages with your family and trusted advisors. Perhaps there are other options that will work better than a Reverse Mortgage.
The following are additional questions potential borrowers ask about reverse mortgages.
If I choose a line of credit, does the bank pay me interest on the unused portion?
No. The lender does not pay interest on a Reverse Mortgage. However, the lender provides a Credit Line Growth rate (a percentage) on your unused line of credit. This is why a Reverse Mortgage has a huge advantage over a Home Equity Loan (HELOC).With a HELOC, you have to refinance if you want more money. The HECM/Reverse Mortgage has a growing line of credit (compounded) at the same rate as the interest charged on the loan and also 1/2%. Therefore, if left alone, there will be more money to access in the future than when your Reverse Mortgage closed. Of course, with the line of credit, you only pay back what you used.
Would a "Living Trust" be eligible for a Reverse Mortgage? What about a Life Estate?
A homeowner who has put his or her home into a revocable living trust can take out a Reverse Mortgage. A Life Estate is acceptable for Reverse Mortgages as well as Power of Attorney and Guardianship. The Reverse Mortgage Lender must review the appropriate documents as part of the loan process and in some cases may even approve irrevocable trusts.
Reverse Mortgages and Equity Loans - Similar, But Different - Although a Reverse Mortgage is a lot like an Equity Loan, there are some significant differences.
(a) With a Reverse Mortgage your credit rating is not a determining factor.
(b) Unlike an equity loan you make no monthly mortgage payments.
(c) With an Equity loan, you would have to refinance to increase your line of credit. With a Reverse Mortgage your unused line of credit increases year after year giving you access to more funds without the need to refinance.
Can my plan be changed during the Reverse Mortgage? Yes. You can change from a line of credit to monthly payments or vice versa at any point in your Reverse Mortgage. You will have to sign forms changing the structure of your plan, but it can be accomplished. After all, it's your money to structure for your needs.
What if I owe more than my home is worth when I sell? A Reverse Mortgage is a "non-recourse" loan which means the house stands for the debt. You can never owe more than your home is worth upon the sale of the property even if your home's value is less than what is owed the lender. Mortgage insurance, required by the FHA, protects borrowers from owing more than the value of the home. Having a non-recourse loan means that neither you nor your heirs will ever owe more than the loan balance or the value of the property, whichever is less, and no assets other than the home can ever be used to repay the debt.
It takes a little bit of knowledge and understanding to determine if a reverse mortgage is the right vehicle for you. Continue reading, talking, evaluating, and contact Advisors Mortgage to receive your free information and free reverse mortgage quote.
Taking out a reverse mortgage is an important step. It is a life changing decision and an important one. If you feel your questions and concerns have been properly answered, here is how to get the process started! Set up your HECM counseling and obtain your HECM certificate..
At the PROS and CONS page, you will find more information as well as information on the HECM Line of Credit feature where your line of credit grows over time so your money is truly maximized.
Your home must be debt free to qualify.
FALSE. If you have an outstanding mortgage or equity loan balance, and as long as there is enough equity, you may be able to pay off your mortgage and qualify for a Reverse Mortgage. All current mortgages, judgments or liens must be paid from the Reverse Mortgage proceeds and are then added to your Reverse Mortgage balance. A Reverse Mortgage specialist will advise you of the amount you qualify to receive and if your current mortgage balances cause a shortfall.
Only senior homeowners who are low on cash can benefit from a Reverse Mortgage.
FALSE. Seniors from all walks of life are taking advantage of Reverse Mortgages. Even though some borrowers may have greater needs than others, a Reverse Mortgage can be an excellent financial or estate planning tool. Homeowners with high value homes are using Reverse Mortgages in a variety of ways. Protecting their estate from some of the estate tax after their passing can be accomplished with a Reverse Mortgage since a Reverse Mortgage places a lien on the property, and that lien is not subject to estate tax. (Consult with your tax advisor.)
Only those who have excellent credit, sufficient income, and good health can qualify for a Reverse Mortgage.
FALSE. Although there will be a Financial Assessment to determine whether a reverse mortgage borrower can pay the taxes and insurance on their home, you can still obtain a Reverse Mortgage once approved.
Bankruptcy, foreclosure, and judgments prevent you from obtaining a Reverse Mortgage.
FALSE. Borrowers who are currently in bankruptcy or foreclosure may be able to secure a Reverse Mortgage. Your bankruptcy trustee may give you permission for the Reverse Mortgage to go forward. But you must show you've been on time with your bankruptcy payments for 12 months. Consult with your attorney and your Reverse Mortgage specialist for details.
I will have to make monthly payments if I have a Reverse Mortgage.
FALSE. With a Reverse Mortgage, you never make any mortgage payments. However, if you desire to make payments to maintain your equity, the lender will accept them.
The lender will take title to my home and own my home if I take out a Reverse Mortgage.
INCORRECT. You retain title and ownership of your home throughout the life of the Reverse Mortgage. The ONLY way a mortgage company can take your home from you is through a foreclosure action, whether forward or reverse.
My heirs will be personally responsible for my debt.
Since the Reverse Mortgage is a non-recourse loan (a loan secured by collateral, usually real property), and since the loan is in your name, your heirs are not personally responsible for the loan. Also, the lender can only look to the sale of the property for repayment of the debt. Your heirs, however, may wish to keep the remaining equity by selling the home or they might decide to keep the home by obtaining their own mortgage. (In the case of keeping the home, the full balance of the Reverse Mortgage will be due.)
If I am using Medicaid for my in-home care, I will not qualify.
Low income adults and people with disabilities who are unable to work may be eligible for the Medicaid program. Special categories exist which allow persons who do not fit within low income guidelines to receive Medicaid. Medicaid, a government program, can be affected by a reverse mortgage.
If you want to keep your benefits, you need to keep track of when you spend your money as well as how your Reverse Mortgage proceeds are distributed. If you choose to receive a lump sum from your Reverse Mortgage proceeds, you need to spend the money immediately. Medicaid only allows individuals to have a certain amount per month in liquid assets. Please consult your tax advisor and Medicaid for more info.
NOTE: Reverse Mortgage proceeds are not counted as income, so the per month limit shouldn't be affected by the Reverse Mortgage. On the other hand, if you choose a lump sum and don't spend it within the first month, the remaining proceeds would be considered an asset after 30 days and would therefore affect your eligibility. Speak to an attorney or financial planner about these matters as you do not want your eligibility to be affected.
Family members who have a mom or dad that needs in-home care will find a Reverse Mortgage particularly useful. I have personally worked with many children of senior homeowners who needed in-home care, and a Reverse Mortgage was the perfect vehicle for them. If there is a situation where there is need for community Medicaid, it's good to consult your attorney who will counsel you on the amount of money you are permitted to have in a bank account and yet still retain Medicaid.
To find out more, CLICK below for What Are the Safeguards?
When NOT to get a Reverse Mortgage:
• An equity loan (if you qualify) may be a cheaper way of getting cash out of your home as closing costs may be lower.
• If your primary goal is fixing up your home and a community loan provides adequate funds, a reverse mortgage is not your best option.
• If you are ill and assisted living or a nursing home is imminent and you will be out of your home for 12 consecutive months, do not choose a reverse mortgage as this will trigger a demand for payment of the reverse. The key word here is "consecutive".
• If your financial situation will preclude you from paying real estate taxes, insurance, and maintaining your home, forego a Reverse Mortgage.
• If your children invite you to live in their home and spend your remaining years with them, this may be a better alternative than staying in your home.
• If you live with someone (not including non-borrowing spouses) not on the loan who won’t be able to live within the home should something happen to you.
NOTE: If you fail to pay your taxes and homeowner's insurance or fail to maintain your property, you could lose your home.
If a reverse mortgage is not for you or if you are a first time home buyer and simply want to purchase a home or need a refinance, Advisors Mortgage has conventional refis, VA, FHA, 203k loans, construction loans, LIBOR loans, loans for first time home buyers, and loans for those with not so perfect credit.
ADVISORS MORTGAGE GROUP. WE TAILOR LOANS TO MEET YOUR NEEDS.
3330 Park Avenue, Suite 1, Wantagh, New York 11793
ADVISORS MORTGAGE GROUP, LLC Branch NMLS 1833015, 3330 Park Avenue, Suite 1, Wantagh, NY 11793 Licensed Mortgage Banker. Licensed by the New York State Department of Financial Services, Licensed by the New Jersey Dept of Banking and Insurance
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