When you are considering a reverse mortgage, you need to review the reverse mortgage pros and cons. Review the following information which will help you in your decision.
The PROS of Reverse Mortgages:
• The HECM Line of Credit (LOC) option has many advantages for the senior borrower. First, the line of credit grows over time at the SAME EXACT rate as the interest rate on the loan. If you let the line sit there untouched for say five or ten years, it will be substantially larger at the end and ready for you to use. You are not charged interest as it's not considered interest but a growth rate. Also, the line of credit cannot be cancelled by the lender. You also do not have to qualify with a particular credit rating in order to get a HECM or qualify for the line of credit. While there is a financial assessment in order to ascertain if you can pay your taxes and homeowner's, there is no requirement to have a particular credit rating. I find this line of credit feature to be a tremendous benefit for those who choose monthly stipends and also a line of credit.
Tax free income insured by the Federal Government which continues as long as your home is your primary residence. Freedom from stress and worry.
• Change your plan at any time from a line of credit to monthly proceeds or a combination (depending on what remains.)
• Unlike an equity loan there is no health requirement and no minimum credit score score requirement, although a credit report is required on all loans.
• A great option for seniors wanting to remain in familiar surroundings and in the same community where they've lived for years.
• Moving from one's home can cause emotional turmoil and stress for many senior homeowners. Memories were made in your "home sweet home", and proximity to loved ones may seem a much better option.
• Reverse mortgages can eradicate existing monthly mortgage payments or other debt which is a plus. But It all depends on your equity and the lending limit of your reverse mortgage. NOTE: These debts will be transferred to your reverse mortgage and interest will accrue throughout the life of the loan.
• You can remain in your home as long as you wish no matter what is owed the lender. You can never be forced out of your home as long as your real estate taxes and homeowner's insurance are paid and as long as you maintain your home.
• You can refinance your reverse mortgage as many times as you like as long as there is equity in your home.
• You can never owe more than your home is worth. This is called a non-recourse loan with no deficiency judgment and where the home stands for the debt. Upon your passing, however, should your heirs decide to keep the home rather than sell, the lender will require repayment of the full mortgage debt.
• None of your assets can be attached to repay the reverse mortgage debt. So whether you have bank accounts or investments, they cannot be used to satisfy the reverse mortgage balance. Additionally, the debt does not pass to your heirs or your estate. The house stands for the debt. Information on the Note the Mortgage and the Loan Agreement clearly state "you are not personally responsible".
• Reverse mortgages have safeguards: capped interest rates, a limitation on fees, HUD counseling, asset protection (non-recourse loan), no maturity date (cannot become due during a borrower's lifetime (goes to age 150.
• Your heirs may be able to claim the interest from your Reverse Mortgage on their income taxes. (Check with your tax advisor).
• There are broad uses for a reverse mortgage. Use proceeds for long term care or other expenses such as repairs on your home or even a vacation or new car.
The CONS of Reverse Mortgages:
• A Reverse Mortgage has all the typical closing costs one finds with a typical FHA mortgage, but HECM mortgage insurance premium fees are.25% higher. The HECM has FHA mortgage insurance added at the outset of the loan and ongoing throughout the life of the loan. But these are not out of pocket expenses. Instead, they are rolled up into the loan.
• A Reverse mortgage can reduce your children's and grandchildren's inheritance because a reverse mortgage is a rising debt loan, and the balance increases over time. Since no mortgage payments are being made, it is the opposite of a typical mortgage where equity increases as mortgage payments are made.
• Selling your home can often provide a greater return on your investment than a Reverse Mortgage.
• Moving from your residence in less than five years makes a Reverse Mortgage impractical. It does not make good sense to use a Reverse Mortgage short term due to the closing costs.
• If you fail to pay your real estate taxes or homeowner's insurance or neglect to maintain your home, the lender can pay them and then require repayment from you. If you fail to pay your lender, they could foreclose.
Reverse mortgage lenders, however, will work with you to cure the default, so you would be wise to cooperate. Reverse mortgage lenders are not looking to take your home, but if there is a persistent failure or refusal to maintain taxes and insurance and pay them for these, foreclosure can result. The tax authority could place a lien on your home if taxes aren't paid and sell your house to satisfy their lien. (As with any mortgage, if you failed to pay your taxes and your homeowners insurance, foreclosure could be the end result.)
•If you leave your primary residence for a period exceeding 12 consecutive months, the reverse mortgage will become due. (Nursing homes, assisted living, etc.)
• If your heirs wish to benefit from your home after your passing, they can sell the property and keep the remaining equity or they can get their own mortgage on the home. However, in keeping the home, the full balance will be due.
• Medicaid may be affected, and you may not qualify for benefits unless you spend down your Reverse Mortgage proceeds each and every month. (Check with your attorney and Medicaid to discuss Medicaid's parameters). .
With the changes that have taken place over the past few years, HECM borrowers can having great confidence they can remain in their homes for as long as they wish. Questions about maturity events (when the HECM ends) and the new Financial Assessment which qualifies borrowers and makes certain they can pay their taxes and insurance are covered on this page.
Not having to pay any monthly mortgage payments on the HECM is a great advantage. But what's even better is the LOC, Line of Credit. You can draw on your credit line whenever you need to whether to enjoy life more or pay some bills.
The HECM line of credit stays open so the funds are there when you need them. The HECM line of credit grows over time as the unused portion of the line of credit grows at the compounding rate plus 0.5%. So, for example, if you took out the HECM line at age 62 or 65 and left it there untouched for say 10 or 15 years, just think of how your money would have grown.
Now, you don't pay any interest on your HECM line of credit even as it grows, and that is why we don't call it "interest" but a growth rate. If you put the same money in a savings account, you would pay interest on that money.
"HECM: Both the reverse mortgage and HELOC will only accrue interest on the money drawn or borrowed. Only the reverse mortgage’s line of credit will allow the unused portion to grow at the same rate the borrower is paying on the used portion of the line. This will give the borrower greater borrowing power." ... advantage -- the credit line growth rate and the fact that the line cannot be closed like a HELOC at the banks discretion."
Financial planners used to give reverse mortgages a bad rap, but since the safeguards have been enhanced, this is no longer true. Reverse mortgages can be a very valuable financial planning tool which can help retirees cover many of the lifestyle expenses that crop up and also enhance their retirement portfolios.
Rather than obtaining your reverse mortgage out of sheer need, financial planners suggest taking it out earlier. Reverse mortgages are now safer than ever with the inception of the Financial Assessment which assures lenders that the borrower can pay their real estate taxes, homeowner's insurance, and any fees such as condo or HOA fees.
HUD has designed the reverse mortgage to ensure borrowers have all the resources they need to fulfill all the requirements of the loan as it progresses throughout their lifetime or time in the home. Financial planners who study income plans now see the benefits of a reverse mortgage and using the home's equity for retirement income.
When you truly understand how the HECM line of credit works, that your line of credit GROWS at the same exact rate as the rate on your loan, or how you can maximize your investment portfolio with a HECM, you will be amazed at the intelligence behind the HECM. Just the fact that financial advisors now recognize the beauty of the program is impressive.
Advisors Mortgage will provide you with a free quote, and since this loan can be customized to YOUR benefit, after all it's your equity to delegate to your advantage, we will work up a quote or several different scenarios for you. So give Kathie a call. You can be among the many who enhance their lifestyle and retirement portfolio with a reverse mortgage.
Asking the right questions can help you determine if a Reverse Mortgage is the right vehicle for you. After all, a Reverse Mortgage is not for everyone.
* Am I going to stay in my home for the foreseeable future? If you are planning to move in a few years, it's not the best option for you.
* How would my life change if I could get rid of my mortgage payments? For many seniors, getting rid of a mortgage payment is life changing.
* What would it be like to have money to do the things I've been wanting to do and to have my home work for me
*How long has it been since I was able to go on a vacation, buy a new car, or have surplus of money for emergencies?
All these questions are legitimate questions senior borrowers might consider. Consult with family and trusted advisors. A free quote will give you the numbers and figures so you will see firsthand how much money is available to you.
How Reverse Mortgages Have Changed Lives
Reverse Mortgages aren't one size fits all. Be sure it's right for you! Countless senior homeowners having taken advantage of this wonderful tool. Perhaps you will be another success story.
RUTH: "I was able to purchase a home in Atlanta, and now I own two homes, one in New York, one in Atlanta, with no mortgage payments. Having a Reverse Mortgage has helped me be closer to my family and to be able to spend time with them. It's been wonderful." Amityville, Long Island, NY
MARGARET: "My home was in foreclosure, and I had declared bankruptcy. My Reverse Mortgage specialist and the Mortgage Processor worked very hard to help me. The Reverse Mortgage ended the bankruptcy and the foreclosure. I even got some cash out. I am finally free of my mortgage payments and all my debts." Islip, Long Island, LI, NY
ANN: "Doing a Reverse Mortgage helped me to get rid of a monthly mortgage payment that was about $800 per month. With that money I can invest, do things around the house, and just do whatever I want." Holtsville, Long Island, NY
JAMIE: ". . .money was tight.. . .my mortgage got behind. It made me nervous whenever I got letters from my mortgage company. Then we called a Reverse Mortgage specialist. . . before I knew it, my mortgage payments were history. It was the best thing we could have done." Bay Shore, Long Island, New York
KEN: "My parents passed away, and the kitchen needed work. With the Reverse Mortgage, I have the money I need to do repairs on my house. I have money left in the Reverse Mortgage if I need more money." East Islip, Long Island, LI, NY
ANITA: I had always relied on my husband's income all my life as I was raising my children. When my husband died, my safety net was gone. Then, I heard about Reverse Mortgages. I was able to keep my home and handle all the bills without working. I now have a monthly check that comes directly into my checking account. Between my husband's social security and pension checks and my Reverse Mortgage check that comes faithfully every month, I can live freely and enjoy the home I have lived in for 41 years. I am so thankful there was an answer for me. Medford, LI, NY
JOHN AND CORINNE: The Reverse Mortgage helped us buy a new car. My husband and I needed a new vehicle to drive the grandchildren around in. Not only did we buy a new car, but we went on a much needed vacation to the Poconos! Patchogue, Long Island, NY
KATHIE ADLER, SENIOR REVERSE MORTGAGE SPECIALIST - RESIDENT OF LONG ISLAND FOR OVER 50 YEARS CAN HELP! Member of Sun Suffolk (http://www.SunSuffolk.org )) - and NRMLA (http://www.NRMLA.org )
KATHLEEN ADLER'S NMLS ID: 65780 - NMLS Consumer Access Site, go to: www.http://nmlsconsumeraccess.org
Reverse Mortgage Helpline - Answering Your Questions about Reverse Mortgages
ADVISORS MORTGAGE GROUP, LLC Branch NMLS 1833015, 3330 Park Avenue, Suite 1, Wantagh, NY 11793
Licensed by the New York State Department of Financial Services, Licensed Mortgage Banker.
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KATHLEEN ADLER, Mortgage Loan Originator, NMLS Identifier 65780, Licensed by the New York State Department of Financial Services, Licensed by the New Jersey Dept of Banking and Insurance. This Website maintained by Go Daddy, Copyright 2014 - Website name obtained in 2008. All Rights reserved.
NOTE: Website authorization by New York State Dept of Financial Services is pending. Until this website is authorized, no mortgage loan applications for properties located in New York will be accepted through this site.