What is a Reverse Mortgage?
Mortgage brokers and banks continue to work hard to produce new and innovative products for the public. Like all traditional business, struggling to keep current with a technology boom that brings seemingly unlimited information and ability to comsumers, mortgage brokers have had to develop products to keep at the forefront of the public's minds. The reverse mortgage is an excellent product for cash poor, house rich seniors who struggle to cope with inflation and the onset of excessive healthcare costs. The reverse mortgage actually allows the homeowner to take money out of their property without selling. The mortgage gets paid back when the house is sold. The following article discusses reverse mortgages in more depth. For additional information, call us at 636 391 9997 or email me at RTNolting@NoltingRealEstate.com I would be happy to put you in contact with a mortgage broker or bank that could help you with a reverse mortgage or any banking needs.
As of the first of the year, older homeowners can tap into a larger part of the equity in their homes with a reverse mortgage because of new, higher federal loan limits, according to the National Reverse Mortgage Lenders Association.
Although growing in popularity, reverse mortgages are still an unknown financial product for a lot of elderly homeowners. But if you're 62 or older and find that you are cash poor and house rich - meaning you have a lot of equity in your home, but little or no savings, this is a product that's worth looking into. Or maybe you have some savings but don't want to touch that pot of money.
This type of loan allows seniors to pull out the equity in their home in the form of a loan without selling or giving up title. The best feature: The loan doesn't have to be repaid until the homeowner moves, sells or dies. When the loan is repaid, any remaining equity is distributed to the borrower if he or she is alive or to the late borrower's estate. In addition, the repayment amount can never exceed the value of the home.
Borrowers can take the loan as a line of credit, a lump-sum payment, fixed monthly payments or a combination of these. And because the money received is in the form of a loan, it's not considered taxable income, which means it won't affect your Social Security or Medicare benefits.There is a catch to this product. With a reverse mortgage, the amount of money you can borrow depends on your age, the current interest rate and other loan fees. It also takes into account the appraised value of your house and the mortgage limits for your area set by the Federal Housing Administration.
According to the Reverse Mortgage Lenders Association, the changes affect two products: the federally insured Home Equity Conversion Mortgage, which accounts for 90 percent of all reverse mortgages made in the U.S., and the Fannie Mae Home Keeper loan. As with other FHA-backed loans, the limits for reverse mortgages went up this year in many parts of the country. To see what the limit is in your area, go to www.hud.gov and click on the link for "Search/index." Then scroll down to find the link for "Mortgage limits.
"The loan limits for HECMs vary by geographic area. The limit for houses in high-priced areas will rise to $362,790 from $312,896. The lowest loan limit, which generally applies to rural and non-metropolitan areas, will increase to $200,160 from $172,632. Fannie Mae's national loan limit for single-family mortgages, including Home Keeper loans, will jump to $417,000 from the current limit of $359,650.
If you live in a higher-valued house but would like to cash out more than the FHA or Fannie Mae limits allow, consider a Cash Account loan. I like reverse mortgages. They give homeowners a lot of flexibility and, increasingly, aren't just being used by cash-strapped seniors."I know one couple who at 76 and 75 used proceeds from their reverse mortgage and bought a new Harley Davidson motorcycle with a side car," said Peter Bell, president of the Reverse Mortgage Lenders Association.
"There are basically three types of people who get these loans. There are need-based borrowers, who need the money to supplement what they are getting. There are security borrowers, who are getting by but want to add a reserve to pay for such things as emergency repairs. And there are lifestyle borrowers, who are doing OK on their retirement income but want to add some discretionary income."
To get an estimate of how much you might get in a reverse mortgage, check out AARP's "Reverse Mortgage Calculator" at www.rmaarp.com. AARP is an extremely useful and unbiased source of information on reverse mortgages. For more information go to AARP's very useful Web page on this topic at www.aarp.org/revmort, or call 1-800-209-8085 to order a free copy of "Home Made Money: A Consumer's Guide to Reverse Mortgages."
If this is something you would be interested in, I suggest you get a booklet created by the Reverse Mortgage Lenders Association. It's called "Just the FAQs: Answers to Common Questions About Reverse Mortgages." It's free and covers all the basics and more about reverse mortgages. Call 1-866-264-4466. Or order it online at www.reversemortgage.org.There's another feature of reverse mortgages I like. Borrowers have to get counseling from HUD-approved counselors before obtaining a loan. For information about a HUD-approved counseling agency, call 1-800-569-4287.In fact, HUD recently announced it was expanding its network of counselors. Good thing because, as Bell pointed out, it's important to get all the facts on reverse mortgages and learn how one would affect your estate.
By Michelle Singletary Sunday, Jan. 08 2006
If you enjoy reading about interesting news, you might like the 3 O'Clock Stir from STLtoday.com. Sign up and you'll receive an email with unique stories of the day, every Monday-Friday, at no charge. Sign up at http://newsletters.stltoday.com/
As of the first of the year, older homeowners can tap into a larger part of the equity in their homes with a reverse mortgage because of new, higher federal loan limits, according to the National Reverse Mortgage Lenders Association.
Although growing in popularity, reverse mortgages are still an unknown financial product for a lot of elderly homeowners. But if you're 62 or older and find that you are cash poor and house rich - meaning you have a lot of equity in your home, but little or no savings, this is a product that's worth looking into. Or maybe you have some savings but don't want to touch that pot of money.
This type of loan allows seniors to pull out the equity in their home in the form of a loan without selling or giving up title. The best feature: The loan doesn't have to be repaid until the homeowner moves, sells or dies. When the loan is repaid, any remaining equity is distributed to the borrower if he or she is alive or to the late borrower's estate. In addition, the repayment amount can never exceed the value of the home.
Borrowers can take the loan as a line of credit, a lump-sum payment, fixed monthly payments or a combination of these. And because the money received is in the form of a loan, it's not considered taxable income, which means it won't affect your Social Security or Medicare benefits.There is a catch to this product. With a reverse mortgage, the amount of money you can borrow depends on your age, the current interest rate and other loan fees. It also takes into account the appraised value of your house and the mortgage limits for your area set by the Federal Housing Administration.
According to the Reverse Mortgage Lenders Association, the changes affect two products: the federally insured Home Equity Conversion Mortgage, which accounts for 90 percent of all reverse mortgages made in the U.S., and the Fannie Mae Home Keeper loan. As with other FHA-backed loans, the limits for reverse mortgages went up this year in many parts of the country. To see what the limit is in your area, go to www.hud.gov and click on the link for "Search/index." Then scroll down to find the link for "Mortgage limits.
"The loan limits for HECMs vary by geographic area. The limit for houses in high-priced areas will rise to $362,790 from $312,896. The lowest loan limit, which generally applies to rural and non-metropolitan areas, will increase to $200,160 from $172,632. Fannie Mae's national loan limit for single-family mortgages, including Home Keeper loans, will jump to $417,000 from the current limit of $359,650.
If you live in a higher-valued house but would like to cash out more than the FHA or Fannie Mae limits allow, consider a Cash Account loan. I like reverse mortgages. They give homeowners a lot of flexibility and, increasingly, aren't just being used by cash-strapped seniors."I know one couple who at 76 and 75 used proceeds from their reverse mortgage and bought a new Harley Davidson motorcycle with a side car," said Peter Bell, president of the Reverse Mortgage Lenders Association.
"There are basically three types of people who get these loans. There are need-based borrowers, who need the money to supplement what they are getting. There are security borrowers, who are getting by but want to add a reserve to pay for such things as emergency repairs. And there are lifestyle borrowers, who are doing OK on their retirement income but want to add some discretionary income."
To get an estimate of how much you might get in a reverse mortgage, check out AARP's "Reverse Mortgage Calculator" at www.rmaarp.com. AARP is an extremely useful and unbiased source of information on reverse mortgages. For more information go to AARP's very useful Web page on this topic at www.aarp.org/revmort, or call 1-800-209-8085 to order a free copy of "Home Made Money: A Consumer's Guide to Reverse Mortgages."
If this is something you would be interested in, I suggest you get a booklet created by the Reverse Mortgage Lenders Association. It's called "Just the FAQs: Answers to Common Questions About Reverse Mortgages." It's free and covers all the basics and more about reverse mortgages. Call 1-866-264-4466. Or order it online at www.reversemortgage.org.There's another feature of reverse mortgages I like. Borrowers have to get counseling from HUD-approved counselors before obtaining a loan. For information about a HUD-approved counseling agency, call 1-800-569-4287.In fact, HUD recently announced it was expanding its network of counselors. Good thing because, as Bell pointed out, it's important to get all the facts on reverse mortgages and learn how one would affect your estate.
By Michelle Singletary Sunday, Jan. 08 2006
If you enjoy reading about interesting news, you might like the 3 O'Clock Stir from STLtoday.com. Sign up and you'll receive an email with unique stories of the day, every Monday-Friday, at no charge. Sign up at http://newsletters.stltoday.com/
posted by Russell T. Nolting at
9:22 AM
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