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Reverse Mortgages Only Option For Many Seniors
The financial meltdown that started in the second half of 2006 has pushed back many seniors' plan to retire and in some cases has eliminated that plan altogether. Many economists are now comparing our recent meltdown to that of the great depression of the 1930s and some believe that it is much worse and will be longer lasting.
Our national debt has been spinning out control for so long that many of us that are alive today will never see a balanced budget again in our lifetime. At the state level we are seeing cutbacks on many workers' pensions that they were expecting to retire on and now the money is no longer there. This is not only affecting retirees from state and federal jobs, but also retirees of small businesses that have failed because of this downturn in the economy. Those failed businesses are no longer paying former employees any compensation at all for many years of hard work.
Many seniors are now depending solely on Social Security to finance their futures and what has the government done? The government has suspended COLA's (Cost Of Living Adjustments) because they claim inflation or the cost of goods have not increased. We do not have to look far to see, that is not a true statement especially if you are paying your own grocery bill, or energy bill, or for medicine that you require to stay alive. In past years many seniors were able to depend on family for help, but with unemployment rates at all-time highs in almost every city and state, their families are struggling just to keep a roof over their heads.
With the amount of seniors turning 65 each day (10,000), I am thankful that there are programs like the FHA HECM (Home Equity Conversion Mortgage) or most commonly called Reverse Mortgage loan. This product is fast becoming a lifeline for any home owner over the age of 62 that has equity in there home and no other place to turn. There are many places on the internet to get free information or to see if you qualify and more importantly to match you with the right product! (God help those that don't own a home).
I would reccomend that if you are a home owner and you are struggling to pay for food or medicine, or you are looking to retire early, but need that little extra to get you over the top then look into the reverse mortgage (www.reversemortgagematch.com) product. The FHA HECM is a government insured loan and the best part of this loan is that to be qualified you only need to be 62 and have equity in your home as there are no income or credit score requirements.
All links or website's mentioned in this article have been researched and have been determined to be licensed and reliable to give information on the reverse mortgage loan.
What Is Reverse Mortgage
Whenever interest rates go down, there is almost always a large number of Americans who attempt to refinance their home mortgages. If these people find the right deal, they are able to lower their monthly mortgage payments by a significant amount. For other people in the U.S. who are over the age of 62, a reverse mortgage helps achieve financial stability by eliminating their monthly mortgage payment altogether. So the question is, can older homeowners who already have a reverse mortgage refinance those loans just like they would a conventional mortgage and receive even more money? The answer is yes – if it is done under the right circumstances.
Borrowers may wish to wait until national mortgage rates fall to a level that is significantly lower than the rate for which they secured their reverse mortgages. Otherwise, seniors will receive less money in loan advances, not more. Secondly, homeowners should have their homes appraised to see if the residences have sharply increased in value since the reverse mortgage was obtained. If the home's value has remained fairly constant or has depreciated, then the refinancing process will not be advantageous for the borrower. Next, borrowers should see if the federal lending limit in their area has increased. Those rules and limits change as time passes, and a higher loan limit may allow individuals to get a bigger loan than they did originally. The final factor is the most constant one: age. The older a homeowner is, the more money he or she can qualify for on a reverse mortgage.
So if a situation arises where the combination of these four factors are tilted heavily in the homeowners' favor, then refinancing may be an option. But before starting the refinancing process, seniors should ask themselves: Am I happy with the terms of my current reverse mortgage? Has the reverse mortgage accomplished what I had hoped it would? If not, then the homeowner should perhaps look elsewhere to improve his or her financial situation. The next question to ask is simpler: do I need more money? Just because interest rates have dropped doesn't mean that reverse mortgage borrowers must to embark on the lengthy process of refinancing their loans. Finally, each homeowner should find out if the fees and upfront costs associated with putting together another reverse mortgage agreement will eat into any realized gain from the refinancing process. If so, it may be less trouble to stay in the current reverse mortgage.
If homeowners do decide to refinance, they should look into some additional choices that they might not have had when they first secured their reverse mortgages. For example, they may want to obtain a fixed rate reverse mortgage to lock in the low interest rate and pocket the cash difference after the original loan is paid off. Conversely, if market conditions indicate that interest rates are likely to drop even further, then a variable-rate reverse mortgage might be a better choice, especially if the initial rate is even lower than that of a similar fixed-rate loan. In addition, if a person's home has appreciated drastically, a jumbo reverse mortgage might be an attractive alternative. Though the interest rate of this loan type might be higher, its lending limit would be equivalent to the home's increased value, thus securing more money for the borrower.
But even when mortgage rates remain fairly steady for the life of a reverse mortgage, it still may be a good idea to seek refinancing. For example, let's say that a homeowner acquired a reverse mortgage on a home valued at $300,000 back in September of 2004. At the time, the owner was 65 years of age. As a result, the person received a total cash payment of $145,150. We'll say that the individual accepted this cash in the form of monthly payments of $750.
Now, let's fast forward to September of 2009. The homeowner is now 70 years of age, and we'll say that his home has appreciated in value to $425,000. If we assume that the interest rate and lending limits have remained the same, the person would still qualify for a loan of $232,170. After paying off the $45,000 in payments received over five years (60 months times $750 each month), the individual still nets $187,170 – an increase of $43,020 (minus mortgage costs, of course) over the original loan amount. That extra money coming in every month might be enough to cover additional day-to-day expenses, medical bills, or long-term care needs.
Just like with first-time reverse mortgages, counseling is required from a federally-approved agency before a reverse mortgage is refinanced. This is to ensure that the homeowner will benefit from the changes in market conditions, loan limits, age, and home equity so that the new loan will be more attractive than the old one. But reverse mortgage borrowers can take solace in knowing that if their financial needs change as they age, they still have the option of refinancing.
5 Reasons Why Reverse Mortgages are Getting Another Look
By John Joseph April 28th, 2011
Many folks have turned their noses up to reverse mortgages, or children of elderly parents have wanted to know how a reverse mortgage works before presenting the HECM program to their parents.
With any financial product, one should proceed with caution. Misunderstanding any financial product could result in losses. However, with the right guidance the reverse mortgage program can enhance your retirement by easing the burden of living on fixed income of social security, small pensions and certificates of deposits.
Homeowners who are aged 62 and older may be ideal candidates for this reverse mortgage program. You never give up ownership of your home, you simply have a lien on the property similar to a traditional mortgage. The only difference is that you are not required to make payments until you move or move on. Seniors who look into how the reverse mortgage works will find they have options. Taking money tax free in a lump sum is the most popular because you get the most money or highest principle limit factor, or you can take the line of credit options that will pay you monthly. When your home is sold what ever is owed on the property will be paid off and your heirs will receive the rest. Because the loan is insured with the Federal Housing Administration the balance of the loan will never be greater than 95% of the value of the home.
Read the current market conditions that will make you re-consider the reverse mortgage program:
1. Easy to qualify. Traditional mortgages require income, source of income, ability to pay back the loan, reasonable credit scores, monthly reserves and lots of equity for taking cash out.
Reverse mortgage qualifications are much different. No Income No Assets required!!! Seniors could be making $800 on social security and only have 100 in the bank and still qualify. You are qualified based on age and equity, if you have current mortgage lates or high credit card balances you will still qualify given you have the right amount of equity. Many folks who are being forced to foreclose look to reverse mortgage as the only way to save their home.
Going through counseling is the biggest step. By doing so, you will learn how a reverse mortgage works and if it fits into your retirement plan.
2. Can you save money on cost? Cost for reverse mortgages are similar to any other real estate transaction, however the HECM standard comes with the highest price. Mortgage insurance fees being the bulk of the cost are pegged to the value of the home with a 2% factor. All of the lender fees are regulated by HUD so there is less chance for over charging and the title cost will vary depending on the state and county you live in. Usually the fees are rolled into the initial loan amount which will accrue interest along with the loan balance. Currently there is an annual insurance fee of 1.25 percent that is also paid to HUD. The balance of the loan will grow in accordance to the interest and fees that have been compounding over time.
New changes were rolled out on October 4th. The HECM Saver was introduced. Saving money upfront is easy because the upfront Mortgage insurance is all but eliminated. HECM savers do have higher rates and the lend ability factor is much lower resulting in reverse mortgage holders getting less cash in their hands.
3. Saving money on interest. The Standard HECM and Saver HECM reverse mortgages are available with a fixed rate or with variable rates. It is estimated that 70% of the loans are fixed. Borrowers like having fixed rates seeing how rates are at all time lows. Fixed rates require that you borrow the full amount available which yields the most to senior homeowners.
The reverse mortgage credit line comes with a variable rate based on the LIBOR index and has a margin. Rates are at all time lows so it may go up. Some see this option beneficial seeing you only pay interest on the money borrowed not the entire line. In most cases reverse mortgage borrowers will see an increase of money available on their line of credit if they do not use it. Rates are low, but how long will they stay there?
4. Waiting until you are older than 62. Homeowners who are looking into reverse mortgage loans usually have some need for the product. Eliminating a mortgage payment can really increase your disposable income when you are on a fixed income. While ensuring that either spouse continues to live comfortably in the event of a loss of income from a deceased partner.
The later in years you are, the more you can borrow with the reverse mortgage program. Its best use is as a last resort to help make the ends meet. Reverse mortgage line of credit option is usually like saving for a rainy day.
If you had to sell your home after getting a reverse mortgage, you may not be able to sell the home right away and the home may not sell for enough to pay back the lender. That would leave you without a down payment for a small condo or house and less funds left for quality assisted living.
Another concern deals with the loan being mis-sold. Non borrowing spouse or family members may be in peril if the reverse mortgage borrower dies, then the resident will have to pay off the loan or move out so it can be sold.
With the cost of living increasing every year, a fixed income limits the amount of money one can spend per month. If your home owner’s insurance spikes and you don’t keep up payments, you would be in default and could be foreclosed on.
Some situations allow for a refinance if there is proof of tax or insurance default. Letters have gone out to those who don't hold up their end of the bargain.
5. Look at filling short term needs. The cost associated with any real estate transaction let alone a reverse mortgage are usually too high for short term needs. Welcome the HECM Saver for the reverse mortgage option. The upfront Mortgage insurance fees can be slashed as much as $11,000 in some cases. This is a good thing for someone who only needs a little money to get them by while waiting to sell or to do basic home improvements. Cash is king, and that is one thing you may need while waiting for the housing market to improve. Repay your loan and make your move. I can also help save you from going into foreclosure until you find another place to live.
Reverse mortgages provide options, but one must have a plan for a possible exit with cash intact.
Things to know about Medicare
By John Joseph April 29th, 2011
I was at the hospital last week with my wife and we had to go to the billing department because we had a balance that was due because our insurance did not cover everything. So we were waiting patiently behind an older woman who was at the window paying what was owed because her Medicare did not pay the entire cost of her husbands hospital stay. My wife and I expected to pay because we are younger and we are not on Medicare but you can be assured that this lady that was in front of us did not expect to pay because the conversation was not a happy one.
So I did a little research on medicare because my mom is older and on medicare and I wanted to find out why that 66 year old woman in front of us was so mad and hopefully never see my mom put in that position. The problem with any program whether it be offered by the government or any company that has age requirements is that you never really look into the program until you fit that age group. That could be a mistake especially with medicare because once you sign up for medicare the clock starts ticking. Let me explain, the 66 year old lady that my wife and I were standing behind is the perfect example, if she had been informed she would have looked into medigap insurance that helps pay for what medicare does not pay.
Once you sign up for medicare at the age of 65 you have a period of time that is called open enrollment to sign up for medigap insurance. This open enrollment period only lasts six months, and if you do not enroll within that six month period, you do not have the same rights and benefits as you do during that time. You may end up paying more for your premiums, or can even be refused coverage (based on pre-existing health conditions and other factors). Medigap Plans have been put in place to help the individual pay medical expenses that are not covered by Medicare. The policies are sold by private insurance companies and supplement your original plan. Some benefits include reduced out-of-pocket costs, freedom to change health care providers and coverage for deductibles and co-payments.
The conversation that my wife and I were eavesdropping on now makes more sense to me because that woman had missed her open enrollment period and she had to pay the entire cost of the co-pay which in her case was $1000.00. The story does not end there, the cost of the medigap insurance plans can get expensive and you can expect to pay up to a few hundred dollars a month for this type of supplemental insurance. The economy of today is hurting all citizens of our country but unfortunately it is hitting the senior population the hardest. I do not have an answer for every senior in our country but I may have an answer for some seniors' that are home owners. What I have found is that senior home owners that qualify are supplementing there income by getting a reverse mortgage and having the ability to live there retirement years without the stresses that today's economy has brought to many of us.
The best part of the reverse mortgage loan is that the qualifications for this loan are very simple. You have to be at least 62 years old and have some equity in your home and the percentage varies by the age of the youngest borrower. A rule of thumb would be around 38 to 40 percent equity to qualify for the reverse mortgage loan. So lets use an example of a home that is worth $100,000, if you have a mortgage balance of $60,000 to $62,000 you would must likely qualify. Depending on how old you are you could qualify even if your mortgage balance was higher then $62,000. So with a reverse mortgage loan in this example the borrower could eliminate the mortgage balance and save that monthly payment that they are making to the bank each month. They now can use that money to pay for Medigap Insurance or anything else they choose. If you want to know more about the reverse mortgage loan there are plenty of websites on the internet like www.reversemortgagematch.com that can give more detailed information and point you in the right direction so you can start enjoying your golden years as opposed to worrying about your golden years.