If you or someone you know is over 62 and a homeowner, you have a unique opportunity to get significant, spendable value from your home, even if you still hold an existing mortgage.

Senior homeowners have spent years, often decades, building up equity in their homes. An increasingly common practice of homeowners over the age of 62 is to obtain a reverse mortgage (also known as a HECM, a home equity conversion mortgage), which gives qualified senior homeowners a proven solution to help fund their retirement needs. In addition, and importantly to most independent seniors, a reverse mortgage allows them to live in their home as long as they wish.

As a Member of the Top 5 in Real Estate Network, people often ask me if reverse mortgages are a good option to consider. For some, it can be, but before moving forward, it’s important to fully understand how they work.

Here are five facts you need to know about reverse mortgages:

1. Reverse mortgage candidates must be at least 62 years of age, have significant equity in their property and be looking for a reverse mortgage on their primary residence only.

2. Anyone who intends to apply for a reverse mortgage is required by law to complete a 45-minute counseling session with a HUD (Housing and Urban Development) approved counselor.

3. The sum from a reverse mortgage can be paid to you in a couple of different ways: all at once in a single lump sum of cash; as a regular monthly loan advance; as a credit line that lets you decide how much cash to use and when to use it; or you may have the option to choose a combination of any of these payment plans.

4. The amount of cash you can get from your home’s equity is determined by a number of factors including your age, your home’s value and location, and current interest rates.

5. Reverse mortgages may have tax consequences, could affect eligibility for assistance under Federal and State programs, and may have an impact on the estate and heirs of the homeowner.

If you would like to look into a reverse mortgage for yourself, a friend or a loved one, please e-mail me and I can assess your particular situation to see if it is indeed a good option. Please also forward this article to anyone else you know who may benefit from a reverse mortgage.

Myth 6

6 – Wait a few years and you will get more money. This is a new myth circulating among well intentioned but ill informed friends, relatives or advisors.  It’s beginning to look like waiting is a very poor strategy even though calculations are partially based upon age.

Legislation before both the House and Senate propose changes to HUD’s Home Equity Conversion Mortgage program that would reduce the loan to value ratio (principal limit) seniors might expect.  The bill before the House proposes a 10% cut.  Legislation proposed by the Senate appropriations bill would limit the cut to 5%.  In either case, the result is the loss of tens of thousands of dollars to most seniors.  The Senate version also rolls back the $625,500 lending limit to previous levels.  Seniors with higher value homes would lose even more money under this proposal

These bills still need to go before a conference committee to work out a compromise.  But the sentiment among lawmakers is clearly to reach a ‘net zero subsidy rate’ goal for HUD.  A request for $800 million by HUD to subsidize possible future losses triggered this and the legislators will “fix” the problem by lowering dollars seniors can receive.

Another proposal is to increase the mortgage insurance premium paid to FHA to .75% monthly.  3/4 of a point would be added to the interest rate in order to supplement the mortgage insurance fund.  The rate is currently 1/2 point.

Add to this the continued decline in home values in most regions and it becomes clear that waiting is a very bad strategy.  I see it every day and it is heartbtreaking…seniors who wait too long and when they are finally ready to move forward with a reverse mortgage find that they do not qualify because their home value is too low and their mortgage balance is too high.

The Home Equity Conversion Mortgage is the sole reverse mortgage insured by the central government. HECM loans are insured by the Fed Housing Administration ( FHA ), which is part of the U.S. Department of Housing and Urban Development ( HUD ). To qualify and continue to be accepted for an HECM the loan must be maintained over time.

As a state insured loan, HECMs must follow particular servicing rules established for the protection of the homeowner who is taking out a reverse mortgage. Since different types of loans and banks are abounding, HUD maintains and updates a group of guidelines to streamline the standards for HECM reverse mortgages.

previously, when a mortgagor fails to pay taxes or insurance, the servicer adjusts the present payment schedule to allow them to be paid back for any advances made. After March of 2006, servicers in Texas can’t make unauthorized changes to a credit line without the borrower’s approval. The Texas Constitution prohibits banks from unilaterally amending the terms of the document administering the extension of credit.

Normally, HUD will approve a 3rd extension to allow more time for an estate to sell the property just when a sale is outstanding on the property. However [*COMMA] due to the current market and commercial conditions, HUD will briefly consider 3rd extensions on HECM loans where there is not a sale outstanding. These requests will be reviewed on a case-by-case basis to determine if it is in the best interest of HUD to grant additional time for the property to be sold. Thanks to the nature of the 3rd extensions, further documentation will be necessary to explain the approval of further time.

Another current change due to the poor economic situation is that, though HUD will not usually consider permitting the mortgagee to sell a purchased property for an amount less than the valued value, for now they will review requests to accept an amount that is less than the valued value on a case-by-case basis as well as determine if the sale is in the best interest of all parties involved.

Mortgagees are required to get appraisals of a property not later than 30 days after the mortgagor is notified the mortgage is due and payable, or no later than thirty days after the mortgagee becomes privy to the mortgagor’s death, or on the mortgagor’s request regarding an outstanding sale. The property must be appraised at least fifteen days before a foreclosure sale.

A servicer may not be reimbursed more than one hundred pc of the maximum claim amount for any basis.

The servicer should allow the estate time to sell the property if an HECM is called due for reasons apart from death and then the mortgagor passes away. if the estate does not demonstrate interest in selling the property or paying off the loan inside a reasonable time after death of the last surviving mortgagor, the foreclosure should continue. Servicers are needed to inform HUD of the passing of the last surviving mortgagor no later than 60 days from the date of the mortgagor’s death.

Get a quote from a web reverse mortgage calculator before you choose to advance
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If you ask that what is a reverse mortgage and why should we go for it? then my answer will be it’s a government program and according to the US Department of Housing and Urban Development (HUD) it is a “special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash “. So, to be eligible for the nation’s most popular reverse mortgage, HUD’s Home Equity Conversion Mortgage (HECM), you must be at least 62 year old. As, we know that the reverse mortgage is a type of loan against home equity, which is available to seniors so we use reverse mortgage for seniors to for that they can live without any tension and spend their rest of life peacefully. Such mortgages are insured by HUD’s Home Equity Conversion Mortgage program. The Housing and Urban Development Department faces a higher risk for losses following the increase of reverse mortgage limit as mandated by the Housing and Economic Recovery Act of 2008.The Urban Development (HUD’S) Higher loan limits enacted under the HERA and ARRA who may make HUD’s approach less conservative by reducing the proportion of loans for which the property value exceeds the maximum claim amount. This scenario is especially likely in locations that previously had relatively low local loan limits but are now subject to the higher national limit. In short, reverse mortgage is a best option for the seniors allowing them live peacefully and have few dollars every month which they can use the way they wish.