Reverse Mortgage Facts...Is a Reverse Mortgage right for you?

Have you heard about Reverse Mortgage but always wondered what they were?  Is a Reverse Mortgage right for you?

Senior homeowners age 62 and older can use Reverse Mortgages to access the equity in their homes and convert the equity into monthly streams of tax free income and/or a line of credit.  This is accomplished without having to sell the home, give up title, or take on a new monthly mortgage payment. More and more seniors are faced with increasing living costs and are unable to meet the financial demands of today's world.  A Reverse Mortgage will allow them to stay in their home and enjoy a higher standard of living by removing the mortgage payment they are making and allowing them to access the equity in their home to be used for any purpose.  

Reverse Mortgages are becoming more popular. The FHA's reverse mortgage is a federally-insured private loan, and it's a safe plan that can give seniors greater financial security. Many seniors use it to supplement social security, or to meet unexpected medical expenses, make necessary home improvements, and more. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you!

Borrower Requirements:

• Must be age 62 years of age or older
• Must own your property
• Live in your property as primary residence
• Participation in a consumer information session given by a HUD-approved housing counseling agency.

Mortgage Amount Based On:

• Age of the youngest borrower if more than one
• Current interest rate
• Lesser of appraised value or the FHA insurance limit

Financial Requirements:

• No income or credit qualifications are required of the borrower
• No repayment as long as the property is the primary residence
• Closing costs may be financed in the mortgage

What types of property qualifies for Reverse Mortgages?                                                                                        Nearly all types of property qualify, from single family dwellings, two-to-four unit properties that you own and occupy, townhouses, detached homes, to units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. 

Can the lender take my home away if I outlive the loan?                                                                                 Simply stated, the answer is no as long as you continue to occupy the property as your primary residence, keep the taxes and insurance current and perform the other obligations of the mortgage.

What are My Payment Plan Options?

• Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of months selected.
• Line of Credit - unscheduled payments or in installments, at times and amounts of borrower's choosing until the line of credit is exhausted.
• Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home. 
• Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

How Does the Interest Work on a Reverse Mortgage?

With a reverse mortgage, you are charged interest on the money that you receive. Most reverse mortgages charge a variable interest rate that is tied to an index, for example, the 1-Yr. Treasury Bill or the London Interbank Offered Rate (LIBOR), plus a margin.   

Will I Lose My Government Assistance If I Get a Reverse Mortgage?

A reverse mortgage does not affect regular Social Security or Medicare benefits. If you are on Medicaid however, any reverse mortgage proceeds that you receive must be used the month they are received. Funds that you retain would count as an asset and could impact Medicaid eligibility. To be safe, you should contact the local Area Agency on Aging or a Medicaid expert.

When Do I Pay Back My Loan?

The loan is paid back when you choose to not occupy the home as your principal residence, whether you (or in the case of couples, the last remaining spouse) pass away, sell the home, or permanently move out. The amount you owe can never exceed the value of your home. If your home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.

Still unsure about what to do?  Contact an independent counselor that can answer all your questions over the phone and without any "high pressure" sales tactics.

Under What Circumstances Should I Not Consider a Reverse Mortgage?

Because of the upfront costs associated with a reverse mortgage, if you intend to leave your home within 2-3 years, there may be other less expensive options to consider, such as home equity loans, no-interest loans or grants that may be offered by your county government or a local non-profit to repair your home, or a tax deferral program, if you're having problems paying your property taxes. Also, if you want to leave your home to your children, then you should consider other options, because in many cases, the home is sold to pay back a reverse mortgage.

Call Joe Bartolotta with any Reverse Mortgage questions you have for properties located in the state of Florida.

Joe Bartolotta is Florida's Upfront Mortgage Broker working at Fidelity Mortgage Services located in Altamonte Springs Florida.  He can be contacted by visiting www.joebartolotta.com or by calling 407.340.0220 or toll free at 1.800.828.7357