A Reverse Mortgage and its Benefits:

Posted on May 12, 2022 by admin

Firstly, a reverse mortgage allows older homeowners, those 62 years and older to borrow money. This type of mortgage utilizes the current home as collateral for the loan. Even if you paid off your current mortgage, you can still borrow money. The loan value equals only a portion of the equity in the house while adding a tax-free income. In contrast to a traditional mortgage, where the homeowner pays the lender — a reverse mortgage rewards the homeowner.

There is no monthly payment due for homeowners who choose a reverse mortgage. Coupled with that, they can keep their home and can continue to live there. This is perfect for someone on a limited income in their older years. It is important to realize, that the loan must get repaid when the borrower dies, permanently moves out, or sells the home. Moreover, Home Equity Conversion Mortgage (HECM) remains backed by the government. This type of mortgage turns out as one of the most used reverse mortgages.

Qualifications for a Reverse Mortgage:

Accordingly, the primary homeowner must reach 62 years old or older to qualify for a reverse mortgage. And must also meet the following qualifying requirements:

You must own the property outright or paid a significant portion of your mortgage.
The house must serve as your principal dwelling.
Borrowers must have a record of paying all federal loans and debts on time and up to date.
The homeowner must provide all property taxes, homeowners’ insurance, and homeowner’s association dues for the applicant’s future budget.
Applicants must attend an information session led by a reverse mortgage counselor. Also, the US Department of Housing and Urban Development (HUD) must approve the counselor.

How can you get a Reverse Mortgage?

If you own your home and are older than 65, you can qualify. Even if the mortgage has been paid off, you can still qualify. Although, homeowners sometimes are not able to borrow the entire worth of their home. The loan is still a very sizable amount for a person on a fixed income. Secondly, the 4 items below determine the principal limit:

1, The Age of the youngest borrower or eligible non-borrowing spouse
2. Current interest rates
3. HECM mortgage ceiling, the most you can borrow ($822,375 in 2021)
4. As well as the home’s valuation

The older homeowners usually have higher valued property and a lower interest rate. Thus, the greater the principal limit. If the borrower has a variable-rate HECM, the amount may increase. Options with a variable rate include:

Monthly payments must be equal if at least one borrower resides in the property as their primary residence.
Equal monthly payments for a set number of months agreed upon in advance.
A line of credit to use until it runs out
The loan will combine a line of credit with a fixed monthly payment. These payments may last for as long as one lives in the residence, or sometimes they paid back over a specified period of time.

You will get a single-disbursement, lump-sum payment if you choose a HECM with a set interest rate. Interest on a reverse mortgage accumulates each month. You will still need enough money to cover property taxes, homeowners’ insurance, and home maintenance.

In a Reverse Mortgage, who Owns the Home?

You continue to own your own home just like any other form of a mortgage. Nonetheless, when the borrower dies or moves, the full remaining balance will need to be paid.

According to Michael Sullivan, a personal financial adviser with nonprofit credit counseling and debt management service Take Charge America. He says, “If you can’t or won’t pay off the loan, the lender can sell your property. Of course, the lender may sell the property to reclaim the money owed by the borrower.” In most cases, if the house sold for less than the amount owed. The owners or beneficiaries are not responsible for any expenses.

What can you do with a Reverse Mortgage?

A spokesperson for the National Foundation for Credit Counseling suggests that reverse mortgages can help our seniors. Specifically, the appropriate uses of reverse mortgage funds can include the following:

Supplementing retirement income
Covering the cost of needed home repairs
Paying out-of-pocket medical expenses.

Sometimes a person’s normal income or accessible savings is not enough to help them. A reverse mortgage can help supplement the gap. Utilizing a reverse mortgage can help them get more income with low fees. Therefore, it can sometimes prevent seniors from turning to high-interest lines of credit or loans.

Types of Reverse Mortgages:

Reverse mortgages come in a variety of forms and are tailored to a specific financial need of the borrower. Three different types are listed below:

HECM (Home Equity Conversion Mortgage: The Home Equity Conversion Mortgage remains a popular sort of reverse mortgage (HECM). These federally insured mortgages have significant upfront charges. The benefit of this type of loan is that the homeowner can use the funds for anything. You can also pick how to receive the money, such as through fixed monthly payments or a credit line (or both options simultaneously.) Although widely available, HECMs are only available through FHA-approved lenders. Also, all borrowers must acquire HUD-approved counseling before closing.
Proprietary reverse mortgage: Most of these types of loans are not backed by the government. This type of reverse mortgage typically offers a higher mortgage advance, particularly if your assets are worth more.
Single-purpose reverse mortgage: Single-purpose reverse mortgage continues to remain the standard choice over the other two mortgage options. Usually issued by nonprofits and state and local government agencies. This type of mortgage turns out to be the most reasonably priced as well. However, it usually has a much lower amount loaned than the other choices. And homeowners can only use the loan for one specific purpose, such as a handicap-accessible redesign.

The Maximum Amount of Money you can get from a Reverse Mortgage:

According to Boies, the below criteria determine the amount of money you can collect from a reverse mortgage:

The current market value of your property
The age of the borrower
Interest rates
Which type of reverse mortgage do you want
Related charges and fees
Your financial assessment
Additional mortgages or liens you may have
Including any balances of a home equity loan
A home equity line of credit (HELOC)
All tax liens or judgments on the property
The cost of a reverse mortgage?

Reverse mortgages include a lot of added costs. One of these costs consists of the closing expenses. The borrower will incur charges for a reverse mortgage. These charges among others aren’t inexpensive but do add up. The majority of HECM mortgages allow you to roll the costs into the loan. By doing this you don’t have to pay them up-front. They are added to your total amount borrowed. However, doing so reduces the amount of money you can borrow through the loan.

According to HUD, the Following Lists a few of the HECM Fees:

MIP (mortgage insurance premiums) – Closing requires a 2% initial MIP. As well as, a yearly MIP of 0.5 percent of the outstanding loan balance. The MIP cost can be factored into the loan for the borrower.

Origination cost – Lenders charge the greater of $2,500 or 2% of the first $200,000 of your home’s worth. Additionally, they add 1% of the amount over $200,000, to originate your HECM loan. Most importantly, the loan has a restriction, for example, it has a $6000 Maximum cost restriction. Loan restrictions help the borrower by keeping the overall cost down.

Servicing costs – For the life of the loan, lenders might charge a monthly fee. This monthly fee will include the managing fee and a fee to monitor your HECM. For loans with a fixed rate or an annually increasing rate, monthly servicing fees cannot exceed $30, or $35 if the rate adjusts monthly. This limits the borrower from having additional fees added to the loan.

Third-party fees – Additionally, you may incur fees for the appraisal and home inspection, a credit check, title search, and title insurance. As well as possibly a recording fee may be charged. These types of charges occur by a third party and are listed as fees on your statement.

In conclusion, keep in mind that some reverse mortgages have higher interest rates. This can increase your charges and fees. The rates are subject to the lender, your credit score, and other factors. So, let one of our experts help you get your Reverse Mortgage at the best possible interest rate. Our experts will save you money and ensure you get the very best Reverse Mortgage.

6 Disadvantages to Reverse Mortgages

Posted on June 18, 2021January 3, 2022 by admin

It doesn’t take a lot of effort for anyone to become confused about the financial services that are offered to him or her. And when you throw around the concept of a reverse mortgage, you can almost count on uncertainty and doubt.

If you need a quick reminder about what the reverse mortgage plan is, be sure to visit our website. There, you can read – and watch a video — about what a reverse mortgage is and how it might be beneficial for you and your loved one.

In a recent article, we discussed seven advantages to a reverse mortgage plan and why you might want to consider applying for one. In this article, we are going to talk to you about some of the disadvantages that come alongside having a reverse mortgage that you will want to look out for if you decide that it is a plan you want to utilize.

Disadvantages to Reverse Mortgage

Although there are a lot of amazing benefits you will receive as part of the reverse mortgage, you need to know what some of the disadvantages are, too. Understanding both the upsides and the downsides to this plan is necessary for you to make an informed decision about whether applying for a reverse mortgage is the right move for your family.

Some of the potential disadvantages to a reverse mortgage is:

Getting a reverse mortgage comes with fees and expensive closing costs. These fees can include home appraisal and origination fees. Some of the things that can be brought into the closing costs include credit report fees, courier fees, document preparation fees, recording fees and more. If your heart is set on getting a reverse mortgage, this may not be much of a hindrance. However, each fee has its own cost, meaning you will have to expense for each individually. So, if you’re currently on a fixed income, these expensive costs may not be what’s in your best interest.
It will accumulate interest. The reverse mortgage is a loan, so eventually, it will have to be repaid. An example of repaying this is if you sell your house and use that funding toward paying off the reverse mortgage. However, in the meantime, the amount of money that you will have to pay back will grow over time as a sort of interest. The interest rate for reverse mortgages also tends to be higher than other mortgages — as of June 2021, the lowest fixed interest rate sits at 3.06%. But rest assured, the amount you owe will not surpass your home’s value when the loan is due.
It’s not the easiest concept to understand. You may have a grasp on what a traditional forward mortgage is. Now it’s time to flip what you know. Easier said than done, right? That’s because grasping a reverse mortgage is confusing. Instead of borrowing money and paying the loan down over time, you’re gathering the loan over time and have to pay it back when you no longer live in the house. In fact, these plans are so tricky that some people go into default. According to the FHA, almost 20% of those who have taken out reverse mortgage loans between 2009 and June of 2016 are “expected to go into default because of unpaid taxes or insurance.” If you decide to apply for a reverse mortgage, make sure you are on the same page with your lender about what your expectations are, and what the government’s expectations are. You do not want to be left in the dark with any loans, so this is an important step to take.
Some heirs have reported difficulty when trying to pay the dues. Everyone is susceptible to making mistakes, including lenders. Typically, when some who have tried to pay off the loan balance have run into issues, it is because some lenders have failed to keep records, shared mistaken information, or simply lacked adequate response times.
It can reduce your net worth. Think about the point of the reverse mortgage that we stated earlier. You are receiving your home equity in the form of money, right? So as soon as you spend that money, your house will not hold the same value it did before you received the home equity. In simple terms: the longer you are receiving money from your reverse mortgages, the more your equity will decrease. This, coupled with the increasing interest, will lower your overall net worth.
The payments will never fluctuate. This is both a good thing and a bad thing. On the bright side of it, your payments will never decrease. The amount you receive in the beginning is the amount you will receive until the end. Unfortunately, on the dark side, it also means that your payments will never increase. If you are of ill-health, and you know that your medical expenses will rise in the future, the lack of additional funding from your reverse mortgage can be detrimental. This is because you are still expected to pay off the taxes and upkeep that are associated with your home. Otherwise, you won’t be able to stay in your home. Managing both these mounting costs and an illness will bring you stress and financial burdens that will become too much to handle.

Reverse Mortgage Our advice

Although reverse mortgages are a special type of loan, this does not mean they should be approached any differently than other financial products. Conduct your own research online and speak with a specialist. Luckily for you, you can do both of those right here, at The Best Senior Services. By watching our video over reverse mortgages and sharing your needs through our website’s online form, you can have all of your bases covered.

At The Best Senior Services, we pride ourselves in providing seniors with the best tools and resources to stay educated about retirement and finances. That’s why it’s important that we present you with all of the information available about popular plans and products, including reverse mortgages.

Key points to keep in mind regarding a Reverse Mortgage

Just like there are downsides to a reverse mortgage, there are also upsides. Like we discussed in our recent article, some of the great benefits that come with this plan is that you never have to repay the loan as long as you are living in the home as the primary residence, and it helps secure your retirement.

If you have any further questions about reverse mortgages, don’t hesitate to reach out to us today. You can contact us on our website, or call us at 855.979.8277, and we will connect you with a local licensed agent who will address all of your questions and concerns.

7 Advantages of Reverse Mortgages

Posted on June 7, 2021April 12, 2022 by admin

As you get older, you’ll notice a lot of plans and programs you can sign up for. This could be for your health, your retirement, or your home. One of these plans you may hear about is a reverse mortgage, designed for seniors who are 62 and older who have quite a bit of equity associated with their homes.

What is a reverse mortgage?

If you need a quick refresher, let’s start with the basic concept: a reverse mortgage is a plan that is made for seniors. It allows seniors to pull from their home equity to fund other retirement needs that they may have. This allows those who qualify to convert their home equity into cash.

For a better understanding of what this plan is, and how you may qualify, visit our reverse mortgage page.

Why might you need one?

First, know it’s not for everyone. If you plan on moving and/or selling your house to your children, then this is not for you. However, if you’ve run out of outside savings and/or no longer have a source of income, this helps you get the money you need. You may also want to consider a reverse mortgage if you want more flexibility within your income.

Advantages

There are a lot of advantages that come with a reverse mortgage. The most obvious advantage? You can stay in your home. Having a reverse mortgage ensures that you have complete ownership over your home, no matter what the circumstances are or how old you are.

Other advantages include:

Qualifying for a reverse mortgage is not dependent upon whether you have good credit or a job. Generally speaking, if you have sufficient equity on your home (at least 50%-60%), and you meet the other criteria that is required to have a reverse mortgage, then you don’t need to worry about your credit score or employment status.
It helps secure your retirement. If you don’t have a lot of money in savings, but you do have accumulating wealth on your home, then the reverse mortgage is appropriate for you.
It is federally insured. Because your reverse mortgage is federally insured, you will be receiving the payments as agreed on your loan terms no matter what. This means that, even if your loan becomes more than what the value of your house was when it sold, government insurance will cover the difference.
No points necessary. In a traditional mortgage, points come into play. A point is a fee that the lender charges that is equal to 1% of the loan amount. But, because this is a reverse mortgage we are talking about, points don’t come into play. The only fee that your lender could charge you is the origination fee, which can be negotiated with the FHA because the FHA is what regulates it.
Put it toward whatever you want. Believe it or not, a reverse mortgage doesn’t just cover your housing expenses. Your reverse mortgage can also go toward electricity, heat, vacation funds and other retirement necessities, in addition to many more things.
The reverse mortgage will never go “upside down.” This simply means that your heirs to the home will never have to repay more than what the house is valued at.
You don’t need to repay the loan. We saved one of the best perks for last. As long as you are living in the home as your primary residence, you will not have to repay the loan. Once you pass away, your heirs have the option to buy your home back or sell it. If they purchase it, however, there is a chance they will be expected to satisfy the remaining loan balance. In this event, they will want to contact the HECM lender as soon as they can to determine their next steps.

Disadvantages

Although the advantages of reverse mortgages are hard to pass up, reverse mortgages are not invincible to having some disadvantages, and you deserve to know what they are. The disadvantages to consider are the expensive closing costs that come with it and the interest it will accumulate. Not to mention, it is a very confusing concept to grasp. It will take time before you completely understand the obstacles you will have to face when you are trying to qualify.

What happens if you pass away?

You may be asking yourself, “What happens if I am living in my house when I pass on? Does that mean I’m no longer living there?” Well, technically, yes. Once the owners pass away or move out of their house, the loan needs to be repaid. If you have an heir that wants to keep the house, he or she can pay off the HECM or take out a separate mortgage that could cover the remaining payments of the reverse mortgage.

However, your heir will want to consider applying for a new mortgage immediately following your passing. This is because the Federal Housing Administration (FHA) will only allow your heir six months to pay off the HECM. In this instance, interest on the reverse mortgage will still be accumulating in those six months.

How to get a reverse mortgage

If you’re still reading, it’s likely you’re interested in getting a reverse mortgage for your home so that you can fund the other things that are necessary for your retirement. Before you can get a reverse mortgage, there are a couple of things you will want to do first:

Calculate your eligibility. You can calculate your eligibility online by filling out information about the age of the homeowners (you and your spouse), your home value and your mortgage debt. Depending on where you look, you will be able to determine your home equity percentage, the amount in which you are eligible for and the property value search on your home. We can save you a step. Call us or visit our website to get into touch with a qualified agent who will calculate your eligibility for you.
Know your rights as an owner. If you’re married, this is important. The loan does not have to be repaid until both you and your spouse are no longer living in the house. That means if one of you must move into a senior care facility, the loan does not have to be repaid until the other passes away or moves. However, this only applies if both you and your spouse are co-borrowers. If not, then your spouse will be expected to pay back the loan if you pass away.
Understand what works best for you and your loved ones. If you decide a reverse mortgage is appropriate for you, you will want to take steps in the best interest of your family. This can be exercised two ways: creating a will and deciding the best payment method. Creating a will ensures that the needed payments will go toward the correct person. Deciding the best way to repay the loan is up to you, but options include selling your home to your heirs while you’re living, letting your heir sell the home when you pass to pay off the loan, letting your heir pay back the lender, and more. Make sure you speak with your family to make sure everyone agrees on what should be done. Otherwise, there will be confusion and tension that could have been avoided.
Speak with a licensed expert. When you do this, he or she will be able to go over a review of the reverse mortgage at no-obligation. He or she will also be able to go over the application process if you decide that this is the right move for you.
You must receive counseling from a Housing and Urban Development (HUD) counselor. This is a certified and trained representative who will assess your financial situation and appraise your home. Before you can begin the application process, you must meet with a HUD expert.

If you still have questions on what to do, or where to turn, to get a reverse mortgage, then you’re in luck. The answer is easier than you may think. It starts with visiting us, The Best Senior Services, to get into contact with a registered professional who can help you decide whether a reverse mortgage is the best move for you and how you can acquire one. Get started today on our website, or by calling us at 855.979.8277.

Reverse Mortgage