Reverse Mortgage Information

New Reverse Mortgages in Orange County, California as well as the rest of the country will be changing in a few short weeks on October 4, 2010

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

• The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
• The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.  Use a Reverse Mortgage Calculator to see what your Orange County home may qualify for.

 On the bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages here in Norco and the rest of the country will undergo some changes in a few short weeks on October 4, 2010.

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

• The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
• The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.  Use a Reverse Mortgage Calculator to see what you may qualify for.

 On the bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages in Temecula, California and the rest of the country will be changing in a few short weeks on October 4, 2010

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

1. The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
2. The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.  Use a Reverse Mortgage Calculator to see what you may qualify for.

 On the bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages in Corona, California and the rest of the country will be changing on October 4^th.

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

1. The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
2. The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

The bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

 

 

 

Another Reverse Mortgage for Purchase closing today here in Corona! 

My senior borrowers purchased an approved short sale home and closed within 45 days.  Now, granted, they looked for awhile and made offers on several homes before this one popped.  But, I am thrilled to see how sellers and bank owned REO's are becoming more educated and receptive about this method of financing for homeowners over 62 years old.

The transaction went very smoothly with good communication between all parties (isn't that really the key?) If you have any questions about how it works check out Reverse for Purchase.

This set of Reverse Mortgage  Q & A is educational and helpful as you research the HECM product. Let me know what you think!

What Is a Reverse Mortgage?

A Reverse Mortgage allows a senior homeowner to convert a portion of the equity in his or her home, eliminating mortgage payments and gaining tax-free income without losing the title to his or her home. The equity in your home that has built up over years of mortgage payments and appreciation can be paid to you.  Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer uses the home as their principal residence.

Can I qualify for a HUD Reverse Mortgage?

HUD's federal housing administration (FHA) guidelines require that the borrower is a homeowner  62 years of age or older with a low enough mortgage balance or sufficient funds to reduce the current mortgage  balance  low enough that it can be paid off at the closing with proceeds from the reverse loan.  The home MUST be the borrowers principal residence.

To be eligible for a JUD Reverse Mortgage, the borrower(s) must receive formal counseling from a HUD-approved counseling source prior to completing the loan.  To find a counseling agency near you use HUD's own HECM Counseling Web Search at HUD Certified HECM Counselors.

What types of homes are eligible?

The home must be a single-family dwelling or a two-to-four-unit property that is owner occupied. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA approved.  The home must be in reasonable condition and must meet HUD minimum property standards. In some cases, home repairs can be made after the closing of a Reverse Mortgage.

What's the Difference between a Reverse Mortgage and a bank home equity Loan?

With a traditional second mortgage or a home equity line of credit, there must be sufficient income versus debt ratio to qualify for the loan, and monthly mortgage payments are required.  FHA Reverse Mortgages are different in that they pay you and are available regardless of current income. The amount depends on age, current interest rate, other loan fees and the appraised home value or FHA Lending Limits for your area - whichever is less.  There are no monthly payments required. (And there are no prepayment penalties should the senior homeowner wish to make prepayments.) The loan is not due as long as the house remains the principal residence, the property taxes and homeowners insurance are kept up to date and the home is reasonably maintained.

Can the Lender take my home away if I outlive the loan?

No! A borrower cannot outlive a Reverse Mortgage! Nor is the loan due. It does not have to be repaid as long as one of the borrowers continues to live in the house and keeps the taxes and insurance current.  .

Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the loan proceeds from the Reverse Mortgage, plus interest and related fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

How much money is available to me?

The amount you can borrow depends on your age, the current expected interest rate, other loan fees and the appraised value of your home or FHA's mortgage lending limits for your area, whichever is less. Generally, the more valuable your home is, the older you are and the lower the expected interest rate is, the more you can borrow.

What's the most you can owe?

Reverse Mortgages are nonrecourse loans, which means that in seeking repayment the lender does not have recourse to anything other than the home. Not income, nor any other assets. So even if a monthly loan amount advances until you are age 115, the home declines in value between now and then, and the total of monthly payment advances becomes greater than the home's value - you still would never have to repay more than what you could obtain by selling the home at market value.  If you or your heirs sell your home to pay off the loan, the debt is generally limited by the net proceeds from the sale. This is why mortgage insurance is so important. This insurance, which is part of your closing fees, ensures your heirs are not liable for a penny of your Reverse Mortgage after you are gone.

How do I receive payments?

You have several options:

*Tenure - equal monthly payments as long as at least one borrower 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 at times and in amounts of your choice, until the line of credit is exhausted.

Lump sum - obtain a lump-sum payment of some amount when the loan is funded.

*A combination - Most people do a combination of all the options. For example, you could take out some amount as a lump sum for home improvements, travel or large-item purchases, put some into a line of credit for possible future use, and use the remaining as a tenure monthly payment for life.

Are there restrictions on how I use my Reverse Mortgage loan proceeds?

You can do anything you want with the money; it is your money. Many people take vacations, buy a new car and help kids or grandkids with college or their first home. Many people put some in a line of credit that they will use in the future for in-home healthcare, medical costs, property taxes and home repairs.

What are the  costs?

Cost have recently been lowered by most lenders.  Most closing costs are generally of the same type found on traditional mortgages: interest charges, third-party closing costs (title search and insurance, surveys, inspections, recording fees, mortgage taxes that are required in your area. Reverse Mortgages also typically include a "FHA MIP "mortgage insurance premium".  Many lenders have eliminate the loan origination fee and monthly servicing fees.  Some do this on both fixed and adjustable, others only offer it on the Fixed Rate reverse. (This is because of the higher resale value of the fixed rate, closed end loans in the secondary market. )  Monthly MIP is currently charged on a reverse mortgage at an annual rate of .5% (one half of one percent) and is currently being reviewed for a likely increase this fall to 1.25%.

* Line of Credit, Tenure Payments, Term Payments and Combination of benefits are not available on the Fixed Rate Reverse Mortgage product.  The fixed rate reverse is a closed end loan and all funds must be disbursed at the close of the loan - in other words you must take all that you qualify for.

 

I am so excited to have a couple of deals in escrow right now where the buyers are financing their home purchase with an FHA HECM Reverse Mortgage!  It's a relatively new product (2009) and not every agent, broker or buyer is aware of it.

In one instance, a young 70 year old is  putting down $130K on a $318K property in a gated 55+ golf community!  He still works and plans on making payments to his Adjustable Rate Reverse Mortgage and build up a line of credit.  That way he will still be able to take advantage of the tax write off for interest payments.  When he wants to, he can stop making payments knowing that the money he pre-paid is available to him to withdraw again!  I think his plan is very smart.

Southern California Realtors, if you would like some information about how the Reverse 4 Purchase can help you to help your senior home buyers.... just let me know! I'd love to sit down with you and brainstorm.

 

Here's a customer story about one womans reason for a reverse mortgage. I met with a young senior last week, (only 65) who completed her reverse mortgage counseling and will be able to utilize the reverse mortgage to quit her part-time job, payoff her mortgage AND spend more time with her 80+ year old mother while she still has her.

Divorced, with no children, she will use the adjustable rate reverse mortgage and access a little over $2200.00 in cash to do some home repairs.   She will also payoff her existing mortgage, saving over $500 per month in cash flow, establish a line of credit of over $52,000 AND receive $500.00 per month in tax free reverse mortgage tenure payments for the rest of her life as long as she lives in the home.  This will increase her cash flow by $1,000 per month, establish a growing line of credit for any emergencies, and along with her two pensions and social security, allow her to leave her part time job, spend more time with her mother and siblings, time she may never have been able to take were it not for the reverse mortgage.

With the current pricing of zero origination fee and zero servicing fee, her costs are reduced by $6,000 up front and she is able to access about $10,000 more in her line of credit than she would have in February!

I love it when a plan comes together!!

 

 

Hi All,

Another story about a great couple using a reverse mortgage to improve their golden years.

Although they were high school sweethearts, this couple has only been married just a few years.  The home they live in is 30 years old and in great shape.  A single story it is a perfect place to stay for the long haul.  And that is just what they want to do.

With a very small mortgage on the property now, and the blessing of all the adult children, they will use the reverse mortgae will payoff the existing loan. That will increase their monthly cash flow by $500.  But the best part is the emergency funds that will be available for them in the line of credit.  They plan to use the line of credit in the event that either one of them requires in home care for the future, or to replace lost retirement income in the event of one of them preceding the other in "graduation".

For the next few years, while they continue to work, they will be making mortgage payments on the reverse mortgage, (yes you can do that) write off the interest they will pay, AND increase the available line of credit. 

They are especially excited because, with the cushion provided by the reverse they can leave their other assets invested where they can grow with the economic recovery.  People are so smart!

I was tickled to call them right after our meeting to let them know that the company I work for is at this time waiving the origination fee!  Nice.

Hi All, I found this video to be very good and recommend it to seniors considering a reverse mortgage. The video clearly explains what homeowners can expect from the required reverse mortgage counseling. The video is only 4 minutes long so will even inform those of who like to surf with the remote. Check it out!