- Reverse Mortgages
- HECM Intro.
Reverse Mortgage - also known as HECM (Home Equity Conversion Mortgage) - reverse mortgages - is a government insured mortgage loan program designed for senior homeowners to release a portion of their home's equity without the burden of monthly mortgage payments while in retirement.
How would a HECM loan benefit your retirement?
For most Americans, their home is the single largest asset they own. In 2009, half of homeowners age 62 and older had at least 55 percent of their net worth tied up in homeequity.1
What a reverse mortgage loan is not:
- free money or a government grant (it is a mortgage loan and interest is charged)
- not the right solution for every senior (best for those with equity, who want to eliminate a mortgage payment, or need the funds/equity but dont want to sell)
Unlike a traditional forward refinance, HELOC, home equity loan - seniors can qualify without income or credit requirements. Some 80,000+ seniors yearly enjoy the benefits of the reverse mortgage loan including having access to funds in retirement while increasing cash flow by eliminating mortgage payments.
- Do I Qualify?
Do I Qualify For a Reverse Mortgage?
- Borrowers must be 62 years or older (60 days from 62nd birthday)
- You own the home ( can have existing mortgage)
- Home must be your primary residence (you have to live in the home for 183 days)
- Never have defaulted on any Government debt/loans/liens
- Must have enough equity in the home (difference between value of home and any mortgage debt/liens)
- Ability to pay for maintenance, home insurance, and taxes (borrower pays ongoing)
HECM Property Requirements
- Must meet all FHA property standards and flood requirements
- Single family home or 1-4 unit home with one unit occupied by the borrower
- HUD-approved condominium
- Double wide mobile homes (manufactured reverse mortgage)
These properties Do Not meet qualifications
- Mobile homes Not on a permanent foundation or built before 1976
- Working farms, Kennels
- Vacation homes - investment homes (if not the borrower’s primary residence)
- Low Rates.
HECM interest rates
Currently at all time historical low's are important to consider when taking your reverse loan as they determine the true cost to get a HECM loan.
Historically Low Reverse Mortgage Interest Rates!
- low rates means more income/funds from your equity
- low rates equals less in ongoing mortgage costs
- lock in a low fixed rate before rates increase in future
- have short term needs - borrow an adjustable rate and save
- low mortgage insurance rates through HECM Saver at only .01%
April 11, 2012 Fixed Rate Standard Fixed Rate Saver Monthly Adjustable Note Rate 4.00% 4.00% 2.49% Monthly Insurance 1.25% 1.25% 1.25% Monthly Servicing $0 $0 $0 Lending Limit $625,500 $625,500 $625,500 Payment Plans Lump Sum Yes Yes Yes Line of Credit n/a n/a Yes Monthly Payments for Life n/a n/a Yes Combination n/a n/a Yes
Reverse Mortgage Frequently Asked Questions & Answers
What is a reverse mortgage?
What kinds of properties are eligible for a reverse mortgage?
Eligible properties for reverse mortgage include
- 1-4 unit homes
- FHA approved condominiums
- planned unit developments
- Mobile homes
- cooperatives are generally not eligible for a reverse mortgage
1.) Credit scores and income are required for HELOC and home equity loans– not true with the HECM reverse where income/scores are not a factor to qualify.
2.) No age requirement for the HELOC or home equity loan– this is not the case with the reverse mortgage you must be 62 to qualify.
3.) All have risk of foreclosure if no payment is made on property taxes or insurance.
4.) HELOC’s or home equity loans have a mortgage payment required while the reverse mortgage does not. While with all options you can borrow from your equity the HECM reverse is the only which can be done without any further payments in your retirement.
How does a reverse mortgage differ from a refinance?
How can Reverse Mortgage Lenders Direct help me get the best reverse mortgage?
What are the closing costs involved with the reverse mortgage, which portion has to be paid upfront?
Closing costs vary from drastically between different lenders, therefore we had created a free service for seniors who want to comparison shop HECM lenders to save time and money. We have some lenders in our network who offer a (no fee reverse mortgage) with the traditional HECM standard lump sum option.
The upfront costs are minimal for the reverse loan, borrowers are required to pay for the home’s appraisal which is right around $350-$450, those with mobile homes need to pay for further inspections. The main closing costs or fees which you will incur are added onto the loan and you are not required to pay these costs upfront to secure a reverse mortgage. The costs include the following (fees are very similar to a traditional forward mortgage refinance).
Counseling fee ($100-$150 paid by borrower upfront)
Appraisal ($350-$450 paid by the borrower upfront)
Title insurance (varies by state and with property value)
Payoff (if a mortgage is being paid off)
If you wish to lower the upfront costs of a reverse mortgage, you may also wish to consider a ‘HECM Saver’, which reduces the upfront MIP (mortgage insurance premium) to only .01% instead of 2%. The HECM Saver is ideal if you want to borrow a smaller amount than the balance that would be available with a HECM Standard loan, as well as lower the upfront loan costs. The great part of a reverse mortgage is, as long as you keep up with our basic requirements, you will never be asked to pay these costs until you sell or leave your property.
Is counseling mandatory or optional?
What is the HECM Saver option - how is the HECM Saver differ from Standard HECM loan?
Launched in October 2010 the HECM Saver allows for senior homeowners to enjoy all the benefits of a traditional reverse mortgage at significantly reduced upfront costs. This new reverse mortgage product nearly eliminates one of the biggest upfront fees that you were previously required to pay. HECM Saver will have an upfront premium of only .01 percent of the property’s value compared to the traditional reverse mortgage upfront MIP premium of 2%. The HECM Saver is ideal if you want to lower the upfront loan costs and if you don’t need as much of the home’s equity as with the traditional loan (with a HECM saver you are allowed to borrow a smaller % of the homes available equity). The amount of equity you can borrow with thhe HECM Saver is usually around 8-17% lower than with the traditional HECM program.
example of savings: On a $200,000 loan the MIP premium paid upfront on the HECM Saver loan is $20 – compared to $4000 for the HECM Standard. Those who have a mortgage balance and dont have significant amount of available equity will be most likely have to utilize the standard program.
How can I receive the payments from my reverse mortgage?
You are in full control, the amount you borrow to how you receive these funds is completely up to you, any portions which are not borrowed belong to you – and any future equity (if value increases) also belongs to you.
1.) Lifetime monthly income
2.) Credit line – where you only pay interest on the portion borrowed
3.) Lump sum – receive the max as an upfront lump sum
There are 6 different payment options – All of these options are available to all reverse mortgage borrowers.:
* 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 in an amount of your choosing until the line of credit is exhausted. You only pay interest on the acutal amount you borrow from your credit line – any unsued portion grows at a determined rate similar to how a CD account works (the credit line cannot be frozen/cancelled even if home values drop).
* Modified Tenure – combination of line of credit plus scheduled monthly payments for as long as you remain in the home.
* Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
* Lump Sum- the borrower takes out the full loan amount at one time. With this option, the borrower will receive a fixed interest rate for the term of the loan.
If one spouse is not yet 62, can we still get a reverse mortgage?
What is the difference between the different reverse mortgage lenders?
If all reverse mortgages are essentially the same how can I get the best deal? This is where our free service comes in, we are able to comparison shop top lenders, comparing them to find you the best loan to suit your needs. If you have questions or concerns we can help you, in an unbiased way, since we are an independent company.
What risks are the risks of taking a reverse mortgage - are HECM loans safe for seniors?
The majority of the press focused on the negative news of a few seniors who could no longer afford their homes taxes/insurance: as long as you are able to continue to pay your home insurance and your property taxes, and abide by all the terms of the loan, there is very little risk with a reverse mortgage since it is governemnt insured. Instead of a making a risky financial investment, a reverse mortgage is allowing you to reap the benefit of all that you have invested into your home. This program was designed specifically to help seniors gain financial stability, so it was made with the least risk as possible. A reverse mortgage can decrease your expenses by paying off your existing mortgage and other debts, and also increase your cash flow by giving you monthly payments, thus reducing your risk of defaulting on any other responsibility.
Is there a credit score or income requirement in order me to qualify?
Can I get a reverse mortgage to avoid bankruptcy?
Can I lose my home with a reverse mortgage - how would this happen exactly?
Does the reverse mortgage void inheritance?
Are reverse mortgages available for mobile homes (manufactured homes) - what are the property requirements?
Are there any restrictions of reverse mortgages if so what are they?
2.) All persons must be 62 or older (home title)
3.) The property must be your primary residence (like in the home for more than 6 months)
4.) You are required to maintain the property in good shape – you must pay for the homes taxes & insurance
If I get a reverse mortgage will I ever be able to refinance afterwards?
Do I have to own my home free and clear in order to get a reverse mortgage?
Will I still own the home/title to my home after I receive a reverse mortgage?
What if I get a reverse mortgage and the property value increases?
Can I rent a room in my home and still have a reverse mortgage?
How long does the reverse mortgage process take from start to finish?
Some of the major steps along the way included:
0.) fact finding/research
1.) starting the application
2.) ordering the HUD counseling session
3.) ordering the FHA approved appraisal
What are the interest rates on reverse mortgage? Are they fixed or adjustable? Do they tend to fluctuate a lot? Is there a cap on how high the interest rate can be?
Reverse mortgage lenders make money off the interest rates they charge you, while with the reverse mortgage there are never any mortgage payments, the interest rate which the lender charged for the loan is accruing onto the principal which is the amount you borrower thus always increasing your loan obligation. in 2012 interest rates have hit all time low’s due to the Fed’s decision to help the mortgage market and to allow for more homeowners to take advantage of low rates (refinance – reduce payments – or to take reverse mortgages). When rates are at all time low’s there is only one direction they can head from here and that is up – which is bad news if you are thinking about waiting or do not qualify at this time. For those who do qualify right now is the best time to borrow a reverse mortgage based on low rate environment.
Reverse mortgage interest rates are based on the Monthly LIBOR (London Interbank Offered Rate) index – this is a standard index used in the U.S. for many financial transactions.
HECM reverse mortgages come with fixed rates as well as adjustable rates, it is completely up to you to choose which one you want/need. A fixed interest rate is only available if you take a lump sum payment. If you choose a monthly amount or open a line of credit, these options are only available on a variable rate. The interest rate you will be offered is based on market rates at the time your loan closes. Reverse mortgage companies are all federally regulated and offer the same programs but they do not offer the same interest rates/closing thus – hence we created an easy way for seniors to comparison shop these lenders to receive the best reverse loan.
Is the interest on my reverse mortgage loan tax deductible?
What is Mortgage Insurance Protection (MIP)?
Can I get a reverse mortgage on a condo?
Can I sell my home after taking out a reverse mortgage?
Can you compare the decision of selling my home to borrow the equity compared to taking a reverse mortgage?
How do I know what the value of my home is for reverse mortgage?
How long do I have to live in my house before I can qualify?
Is a HECM different to a reverse mortgage?
Does my health matter if I want to get a reverse mortgage?
What is an appraisal and why is it important? Can I choose the appraisal company who values my property?
How much money can I get from the HECM reverse mortgage?
Will I be taxed on the money I get from a reverse mortgage?
Are there any limitations as to what money from a reverse mortgage can be used for?
Can I get foreclosed upon with a reverse mortgage?
Is there any likelihood that my pension will be affected if I seek reverse mortgage?
When must a reverse mortgage loan be repaid?
What are my responsibilities in a reverse mortgage?
Unfortunately no, the reverse mortgage can only be taken on your primary residence (you must live in it for 6 months out of the year). You can get a reverse mortgage on your primary residence and maintain your vacation home as long as you live in the primary residence for 6 months.
Will I still be able to pass my house to my heirs in reverse mortgage?
When should I start seriously considering reverse mortgage?
What if the home is held in a trust can I still qualify for the reverse loan?
Will the loan amount increase over time?
What happens if one of the co-borrowers of a reverse mortgage passes away?
Can a lender make me invest my money from my reverse mortgage elsewhere?
After the borrowers pass away what happens if there is money left over?
Can I get a reverse mortgage if I have a second mortgage?
Is there a maximum limit as to how much I can borrow with a reverse?
Can I get a reverse mortgage if I've filed for bankruptcy before?
If my home is paid for, how would I benefit from a reverse mortgage?
Do reverse mortgages have any sort of prepayment penalty if I decide to pay off the loan early or make monthly payments?
If I owe taxes on my property can I still go through with a reverse mortgage?
Can I use reverse mortgage to pay off my medical debt?
Will the lender own the home or will I if I get a reverse mortgage?
Can a family member stay in the house if I take a reverse mortgage?
Do I need to be represented by a lawyer to get a reverse mortgage?
Can I qualify even if i am currently behind on my mortgage, taxes, and insurance?
Can I take out a reverse to buy a home - I believe this is called a HECM for purchase?
What happens when the last borrower passes away to the property?
Can I make payments to my reverse mortgage loan and pay it off early?
What if my home needs improvements - how can I pay for them?
Do I have to take out the maximum amount that can be loaned to me or can I take out less?
Reverse mortgage sounds too good to be true! What is the catch?
Reverse mortgages have become very popular over the last few years, just last year alone some 100,000 reverse mortgage loans were taken out by seniors just like you. As this particular is becoming more common, lenders have started making the qualifications a lot stricter. Some have implemented income and credit score requirements. At the moment we are able to get you a reverse mortgage without income or credit score requirements, not to mention we have no a ‘no origination or mortgage fee’ policy.
How Does a Reverse Mortgage Work in 2012?
A reverse mortgage is really quite simple. Basically, you can release the equity in your home as money for your retirement, it can be yours without having to make any mortgage payments or without selling your house. Unlike a forward mortgage where you make payments and are given a sum of money to buy or refinance your loan (thus every month the balance goes down little by little), a HECM reverse mortgage can help you can pay off your mortgage (somewhat like a refinance ) or you can take out the equity from the property in the form of proceeds/income. Again no mortgage payments have to be made, lenders still charge an interest rate which accrues to the back end of the loan but as your home increases in value this offsets your interest costs and in some instances the rate of growth on the home will exceed the cost of borrowing.
Some 600,000 seniors have taken out a reverse mortgage during their retirement over the last 22 years. The main reason people take out a HECM loan is to improve the quality of their retirement, by; paying off existing mortgage debt (or any other debt you want to pay off), increasing cash flow, or by simply giving seniors new access to a lump sum of money to be spent without any restrictions.
Receiving your Tax Free Reverse Mortgage Funds
With a home equity conversion mortgage loan you have flexibility as to how you receive the proceeds. There are 3 different options:
- lump sum – With this option you will receive a lump sum of money. This amount can be up to 70-75% of the home’s appraised value. The interest rates are fixed on the HECM lump sum.
- lifetime monthly income – This option will allow you to receive a lifetime source of equal monthly proceeds/income. The rates are adjustable and depend on your age and the available equity in your property.
- credit line – With this option the bank/lender qualifies you for a certain amount of money. You have access to this money when you wish and will only pay interest on the portion which you have borrowed. The interest rates are adjustable.
Choose From 4 Different Reverse Mortgage Types
All 4 types of HECM loans are all government insured HECM loans.
1). Fixed Rate Standard- This is the best program if you are looking for something more long term, this is because the are current interests are low and the fees have been reduced. This options is usually taken if you would prefer to receive a lump sum as the interest rate is fixed.
2). Fixed Rate Saver- This option is for those who don’t need the maximum lump sum funds upfront and are comfortable with an adjustable rate. This program also has reduced fees from the mortgage insurance premium, however, a smaller percentage of equity is available.
3). Adjustable Rate Standard- With this program you can select between receiving your money via credit line or monthly income for life. The amont you can borrow is the maximum amount (the same as Standard Fixed rate). This program is really for those looking to take advantage of the low adjustable rates over short period of time.
4). Adjustable Rate Saver- With this program option you will not receive the maximum amount of proceeds available, however, you will pay less in mortgage insurance premium as rates are historically low for the Adjustable Rate Saver program.
HECM Mortgage Amount Based On:
- The age of the youngest co-borrower (the older you are the more equity you can receive)
- The current interest rate in the market
- Appraised home value or the FHA HECM mortgage limit
- Your personal financial position. HUD has recently approved financial underwriting, there for your payment history, income and credit score and other financial history may have an impact of the amount available.
- The program you choose. The Saver programs have less fees so the lenders extend less of your credit to you.
What are the Loan Requirements for a HECM loan?
No income or credit score qualifications are required*
- No repayment as long as the property is the principal residence
- Closing costs may be financed in the mortgage
*NOTE: Income, credit scores, mortgage/taxes/insurance payment history can all affect the reverse mortgage loan and whether or not you will be able to receive one. HUD is trying approved financial underwriting and lenders can now ask for such information. In 2012 we are still able to lend without reviewing the above making the process easy, most lenders cannot state this.
How Can Reverse Mortgage Proceeds be Spent?
The proceeds from a reverse mortgage can be used for almost anything – never restricted:
- to pay for medical costs or save for future medical expenses.
- to pay off any existing mortgages/liens on the home
- to pay credit card bills or other bills
- for home repairs or improvements
- for property taxes and home insurance
- to increase monthly cash flow
- for travel or leisure purposed
- for gifts
Reverse Mortgages and How They Work - with the current reverse rates at all time lows seniors should consider taking out a reverse mortgage now. It has been predicted that the requirements for a HECM loan are only going to get tougher in the future. Improve the quality of your retirement today, with no more mortgage payements and paying off debts. NOTE: Seniors should budget for home insurance and property taxes.
- HECM Mortgage
- Why Get a HECM?
You are not alone if you are deciding to take a HECM reverse loan - some 100,000 seniors every year take the HECM to improve their retirement why not consider one yourself.
Reverse Mortgages - Why You Should Consider Getting a HECM Loan in 2012
- Option to choose how you receive the funds (lump sum, monthly, line of credit, combination)
- Proceeds are never taxed
- With monthly proceeds option you will receive income for life (this is for as long as taxes/insurance are paid and as long as 1 of the borrowers lives in the home)
- No monthly mortgage payments – ever
- You can live in the property for life (even if home values drop significantly)
- No worrying about foreclosures (you must pay taxes/insurance for home that’s it no mortgage payment is due)
- You keep ownership of the property (not the bank – any current or future equity is yours)
- Its your home you can sell, or move at any time ( not limited staying in the loan )
- Can leave the home to heirs/estate if so desired (all future equity can be theirs)
- If home prices go up that is your equity (you could take another reverse loan if needed at any point in the future to get more money- as home prices increase this will offset the mortgage rate costs)
- Myth The bank will own your home. (you will keep 100% ownership of the home and any current or future equity)
- Myth Your children will be held responsible for paying the loan back. (this loan is non-recourse therefore they will not have to pay it back - FHA will pay any difference is money is owed to the bank)
- Myth Reverse mortgage lenders take advantage of seniors. (not true - the industry is highly regulated and lenders treat seniors with respect and provide knowledge on the product)
- Myth You need good income and credit scores to qualify for reverse loan. (currently you dont need income or credit scores to qualify)
- Myth To qualify, you must own your home free and clear. (if you have a mortgage there needs to be enough equity left for you to qualify)
- Myth You won’t have any equity left in your home to leave for your heirs. (not true, your home will continue to increase in value and the bank will only lend a portion of the equity out so there should be a % of equity there for you or your heirs)
- Myth Once you get a reverse mortgage, you cannot sell your home. (you can sell the home simply use the sale proceeds to pay off the reverse mortgage )
- Myth You will see a reduction in your Social Security income. (reverse mortgage wont affect your social security income)
- Myth Reverse mortgages are only for seniors that are poor. (wealthy seniors are also utlizing the HECM to release equity form their home
- Myth Closing costs are way too expensive. (currently many lenders are waiving their origination fees
- Myth The loan is due and payable when the first borrower dies. (if both borrowers are on the loan then the loan only comes due when both pass away)
- BENEFITS & CONS
Advantages Disadvantages Tax free income (never taxed) Funds may be used for any purpose – no restrictions May impact Medicaid benefits (not Medicare) Own and remain in your home (no need to sell in retirement to get money out of the home) Reduces equity to pass on to heirs No monthly payments to the lender Pay homes taxes/insurance Can never owe more than the value of your home at repayment (non-recourse loan) Does not affect Social Security or Medicare benefits Pays off an existing mortgage, leaving no monthly mortgage payments No longer expensive some lenders are waiving origination fees also HECM saver reduces costs Receive funds as a lump sum, monthly income payments for life, and/or line of credit You can retire in the property for life (even if home values drop significantly) No risk of foreclosure Your equity now your equity in the future (you keep ownership and decide what to do with your equity)
Determine your need for a reverse mortgage and explore our website to learn as much as you can about the HECM loan. We are here every step of the way, whether you need more information, have question, or a ready for a reverse mortgage quote.
Reverse Mortgage Qualification Process in 5 easy steps:
We work with top lenders nationwide who can close on your HECM loan in under 30 days - we have heard some banks/lenders taking upwards of 2+ months in order to close on their loan so keep this in mind when you dealing with competitors.
- Do you Qualify for a reverse mortgage
- Speak to one of our advisers to learn everything about a reverse mortgages
- We will shop your loan with top reverse mortgage lenders, you get the best quote
- Reverse mortgage mandatory Counseling (HUD approved counselor)
- complete HECM reverse mortgage application
- Order Appraisal & receive counseling certificate
- file goes to underwriting and closing papers finalized
- Close HECM mortgage and receive your money/income
HECM Reverse Mortgage Lenders
Retirement portfolios have seen dramatic losses recently, property values have dropped and stock markets have not performed to well either. This is really the perfect financial storm and those on fixed incomes trying to retire are now facing extremely volatile times. A reverse mortgage has helped seniors just like you regain their financial freedom by securing their retirement income. Last year over 100,000 seniors last year took out a HECM loan.
It is more important than ever to compare multiple offers and to make sure you are getting the most amount of equity possible from your home through a reverse mortgage loan. There are more than 2500+ reverse mortgage providers in the U.S., making it nearly impossible for you to compare all these lenders. We work with top reverse mortgage lenders who are committed to providing you with the best interest rates, the most amount of equity/money, all at the lowest costs.
Quick Guide to a Reverse Mortgage
- Flexible Income Plan- You can select how you want to receive your income, either on a monthly basis, lump sum, credit line, or a combination of the following.
- Ownership of the home- You will keep ownership the home and title. Your heirs will have the chance to own the home and if there is equity they can sell and keep the profits once you pass.
- No repayments- You wont have any repayments whilst you live in the home, if the home’s value increases you can get more equity or sell if you so desire.
Reverse Mortgage Lenders Direct
Our goal is to be the smartest solution for homeowners over the age 62 who are considering a reverse mortgage. Our website is built to help you learn everything there is to know about HECM loan program. We are here to compare multiple reverse mortgage lenders and find the one which suits you best. By using our free service you will receive up to 4 competitive quotes from top reverse mortgage lenders.
If there is something that you are still not 100 percent sure about, please do not hesitate to give us a call at 877 700 0534, if you have questions dont hesitate to use our live chat feature.
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