For more information, read my 5 part blog about the new FHA reverse mortgage program updates from September 2010. Link below- good luck.
For more information on the new FHA reverse mortgage rules from September 2010 read my 5 part blog. Link below. Best of luck to you!
The Housing and recovery Act of 2008 will make several improvements to HUD's HECM (Reverse MOrtgage) products.
One of the improvements is development of a purchase product for reverse mortgage.
It will take some time to develop, though - perhaps 3-6 months at minimum. The process in a nutshell will be for HUD to develop a proposal, put it out for comment by the industry (comment periods are usually 90 days), and then final development by HUD. After that it will take time for lenders to figure out how to develop loan products, compliance plans, and processing proceedures.
I wouldn't expect to see lenders offering a HECM purchase until late spring 2009 at the earliest.
Example: I just rec'd today from HUD an e-mail outlining an initial policy and comment period for another change under HERA - a requirement that lenders be prohibited from requiring borrowers to purchase insurance or other financial products as a condition of receiving a HECM loan. Congress's intent is to bar a current practice of financial planners and insurance agents from enticing seniors into taking out HECMs to purchase their offerings. That would seem pretty straight forward... but the industry is entangled to the point that HUD will hear comments from the industry for 90 days before implementing a final rule.
If HUD needs 90 days to implement a rule that seems ipso facto simple, you can imagine the time it will take for the industry to invent an entirely new loan product.
Once approved, I would expect an avalanche of advertising from banks to push a HECM purchase product. Robert Wagner will probably be all over TV with it.
In a reverse mortgage, you have choices to make regarding the way you want to borrow the money. The first type of reverse mortgage is to obtain a lump sum. This type of mortgage allows the homeowner to take out a lump sum of cash for a percentage of the value of their home. Realistically speaking, a home that is worth $300,000 will net the homeowner about $190,000. Mortgage lenders take into consideration how old the borrowers are, where the home is located and if the home needs any upgrades or significant repairs when calculating a reverse mortgage payout. You can even pay down your credit cards through the loan.
A lump sum payment has the highest interest rate for all types of reverse mortgages and unless you need a large sum of money, this type of mortgage may not meet your needs as other reverse mortgages can.
The second type of reverse mortgage is technically considered a line of credit. If your current mortgage is not completely paid off, you will need to qualify for a cash payment in order to pay off the mortgage. Once your mortgage is taken care of, you can apply for a reverse mortgage in the form of a line of credit.
A third type of reverse mortgage involves receiving monthly payments from a lender, ensuring that you have extra money every month to meet your needs while on a fixed income. A home worth $300,000 will roughly net the homeowner $1200 a month in cash payments. The mortgage lender calculates the payment amount based on where the home is located, what the home is currently worth and how old the borrowers are.
The final type of reverse mortgage is a combination of the three that are currently available. You can opt to get a small cash lump sum to pay off your current mortgage, get small monthly payments and keep a line of credit open that you can access easily.
To obtain a reverse mortgage, you must be at least 62 years old. It does not matter what your current income is, only that you own your home or you are able to qualify for a cash payment to pay off the current mortgage. People that own mobile homes will not be able to obtain a reverse mortgage for that property.
Borrowers that want to obtain a reverse mortgage are required to meet with a financial adviser that has been approved by the Department of Housing and Urban Development. This is to make sure that the borrower understands exactly what they are getting into and what they can expect from a reverse mortgage.
It is important to understand that when you obtain a reverse mortgage, the loan is not paid back until you die, sell the home, or move to a new location. The loan is paid back once your home is sold from the proceeds of the sale. If you have money left over after the loan is paid back, you or your heirs keep the money. If once your house sells, there is not enough money left to pay back the lender, that was the chance the lender took and the loss is theirs. Your estate does not pay off the balance.
A reverse mortgage can help you stay in your home that you have loved for so long and that you are still able to enjoy. There is no reason that just because you are retired you should have to worry about moving because you can no longer meet basic expenses. Enjoy your home and your retirement. A reverse mortgage may be just the answer for you to be able to continue to live your life as you have been accustomed.
I have a lender that can help in the Palm Springs area if you need more information on Reverse Mortgages
Until recently, there were two main ways to get cash from
your home: you could sell your home, but then you
would have to move; or you could borrow against your
home, but then you would have to make monthly loan
Now there is a third way of getting money from your home that
does not require you to leave it or to make regular loan
A â€œreverseâ€ mortgage is a loan against your home that you do not have to
pay back for as long as you live there. With a reverse mortgage, you can turn
the value of your home into cash without having to move or to repay a loan
The cash you get from a reverse mortgage can be paid to you in several ways:
â€¢ all at once, in a single lump sum of cash;
â€¢ as a regular monthly cash advance;
â€¢ as a â€œcreditlineâ€ account that lets you decide when and how much of
your available cash is paid to you; or
â€¢ as a combination of these payment methods.
No matter how this loan is paid out to you, you typically donâ€™t have to pay
anything back until you die, sell your home, or permanently move out of
your home. To be eligible for most reverse mortgages, you must own your
home and be 62 years of age or older.
OTHER HOME LOANS
To qualify for most loans, the lender checks your income to see how much
you can afford to pay back each month. But with a reverse mortgage, you
donâ€™t have to make monthly repayments. So you donâ€™t need a minimum
amount of income to qualify for a reverse mortgage. You could have no
income, and still be able to get a reverse mortgage. With most home loans, if you fail to make your monthly repayments, you
could lose your home. But with a reverse mortgage, you donâ€™t have any
monthly repayments to make. So you canâ€™t lose your home by failing to
Reverse mortgages typically require no repayment for as long as you â€” or
any co-owner(s) of yours â€” live in your home. So they differ from other
home loans in these important ways:
â€¢ you donâ€™t need an income to qualify for a reverse mortgage; and
â€¢ you donâ€™t have to make monthly repayments on a reverse mortgage.
You can see how a reverse mortgage works by comparing it to a â€œforwardâ€
mortgage â€” the kind you use to buy a home. Both types of mortgages
create debt against your home. And both affect how much equity or
ownership value you have in your home. But they do so in opposite ways.
â€œDebtâ€ is the amount of money you owe a lender. It includes cash advances
made to you or for your benefit, plus interest. â€œHome equityâ€ means the
value of your home (what it would sell for) minus any debt against it. For
example, if your home is worth $150,000 and you still owe $30,000 on your
mortgage, your home equity is $120,000.
Falling Debt, Rising Equity
When you purchased your home, you probably made a small down payment
and borrowed the rest of the money you needed to buy it. Then you paid
back your â€œforwardâ€ mortgage loan every month over many years. During
â€¢ your debt decreased; and
â€¢ your home equity increased.
As you made each repayment, the amount you owed (your debt or â€œloan
balanceâ€) grew smaller. But your ownership value (your â€œequityâ€) grew larger.
If you eventually made a final mortgage payment, you then owed nothing,
and your home equity equaled the value of your home. In short, your
forward mortgage was a â€œfalling debt, rising equityâ€ type of deal.
Rising Debt, Falling Equity
Reverse mortgages have a different purpose than forward mortgages do.
With a forward mortgage, you use your income to repay debt, and this builds up equity in your home. But with a reverse mortgage, you are taking
the equity out in cash. So with a reverse mortgage:
â€¢ your debt increases; and
â€¢ your home equity decreases.
Itâ€™s just the opposite, or reverse, of a forward mortgage. During a reverse
mortgage, the lender sends you cash, and you make no repayments. So the
amount you owe (your debt) gets larger as you get more cash and more
interest is added to your loan balance. As your debt grows, your equity
shrinks, unless your homeâ€™s value is growing at a high rate.
When a reverse mortgage becomes due and payable, you may owe a lot of
money and your equity may be very small. If you have the loan for a long
time, or if your homeâ€™s value decreases, there may not be any equity left at
the end of the loan.
In short, a reverse mortgage is a â€œrising debt, falling equityâ€ type of deal. But
that is exactly what informed reverse mortgage borrowers want: to â€œspend
downâ€ their home equity while they live in their homes, without
having to make monthly loan repayments.
(To make certain you understand what â€œrising debtâ€ and â€œfalling equityâ€
mean, read the Appendix at the end of this booklet.)
There is a lot of great information on line about reverse mortgages. One the safest spots to learn is on the AARP site. Here is the link http://www.aarp.org/money/revmort/
Reverse mortgages can be a way for families to use equity in their home to buy another home closer to family or for other needs. It is important to read up on the details but it is a way to use equity now without selling your home. Discuss it with a professional and your family.