We assume that the ‘American Dream’ is to own your own home, yet many of us find ourselves carrying a mortgage and hefty payment as we enter our retirement years and experience the declining income that often accompanies this period in life.

If having a “mortgage payment for life”  is part of a dream, let’s not be confused as to whose dream it is. The bankers aren’t lending you money for your home because you have a great property  –they are doing it because they think that you can make the required payments to the bank. When you get a loan they underwrite YOU -not the property- because the responsibility of repayment is yours.  The biggest secret in real estate is that a mortgage is a loan against your income, not against the value of your house.   With an income that generally declines in retirement, eliminating a mortgage payment becomes a major consideration in planning cash flow for retirement. The real question for us in retirement is: How can we leverage all of our accumulated savings, including home equity, to create true wealth and cash flow in our retirement years? To do this, let’s look at some common misconceptions about home ownership and home equity.

Misconception #1:  Equity has a Rate of Return value: We have the misconception that because our home appreciates, or because our mortgage balance is decreasing, the equity must have a rate of return.

That’s not true. Home equity has NO inherent rate of return. Home values fluctuate due to market conditions, not due to the mortgage balance. Since the equity gained by a declining mortgage  in the home has no relation to the home’s value, it is in no way responsible for the home’s appreciation. Therefore, home equity simply sits idle in the home going up and down with the market. It does not earn any rate of return.

Misconception #2:  Home Equity is Wealth Accumulation. If we look at the stark facts, we realize that we finance EVERYTHING we buy in one way or another.  We either pay interest to someone in the form of a mortgage, a car payment, etc., or we surrender the interest or investment gains we could have earned by investing those monies in something which provides an actual rate of return.  When we pay interest   -or-   give up earned interest on a capital investment (which is being stored as unused equity in the house we live in vs. investment property)-   we set ourselves back in the goal of true wealth accumulation.

Misconception #3:  Home equity does not cost us money: What many people don’t understand is that when we leave equity trapped in our home, we incur costs, such as the Lost Opportunity Cost.

The idea behind accumulating wealth is VALUE ADDED.  In the past individuals and corporations didn’t consider the Lost Opportunity Cost  of holding equity accumulated in a property over time. When looked at from a dynamic wealth accumulation point of view, holding unproductive EQUITY is a cost that few homeowners recognize or figure into their financial calculations.  If we allow home equity to remain idle in the home, we give up the opportunity to put it to work and to allow it to grow and compound.

Other areas of “carrying cost” associated with the equity in our home are the cost of maintenance, depreciation, the costs of taxes and insurance, needed upgrades, and the loss of purchasing power due to inflation, etc.

How many times have any of us added into our financial picture the cost of the equity or capital sitting in our home in terms of the real cost of income lost in mortgage payments, the Lost Opportunity Cost of idle equity, the maintenance costs associated with that equity or the loss of purchasing power due to inflation, etc.?

Misconception #4:  Home equity is the same as cash in the bank. Home equity is not the same as cash in the bank. Only cash in the bank is the same as cash in the bank. After all, homes were built to house families, not to store cash in. Investments were made to store cash in. If home equity were the same as cash, you could take the front door off of your house and trade it in at the grocery store for food.  Only cash is the same as cash.

Misconception #5:  Homeownership is always a safe and prudent investment: Why in the world would you want to have the equity removed from your home? There are actually three primary reasons: 1. LIQUIDITY    2. SAFETY    3. RATE OF RETURN.  These three elements are commonly used as the test of any prudent investment. When evaluating a potential investment opportunity, experienced investors will ask the following three questions: 1. HOW LIQUID IS IT? (Can I get my money back when I want it?) 2.  HOW SAFE IS IT? (Is it guaranteed or insured?) 3.  WHAT RATE OF RETURN CAN I EXPECT?  Home equity fails all three tests of a prudent investment and confirms what we already knew or suspected: our home is where we live and not really an investment.

Misconception #6:  It is risky to leverage home equity. One of the biggest misconceptions homeowners have is that their home is the best investment they ever made.  Let’s be clear:  Buying a home can be a great investment. However, the wealthy buy their homes with as little of their own money as possible, leaving the majority of their cash in other investments where it’s liquid, safe, and earning a good rate of return.

While the wealthy often tie up as little capital in their homes as possible, the average homeowner is reticent to do the same due to the inherent risk involved in carrying a mortgage. He or she would rather have the security no mortgage obligations since for the retired homeowner mortgage default could be catastrophic.

In Retirement, does it make sense to use our home equity in a wise and financially productive way?  Let’s consider:  In the early 20th century people planned to live in their home during their entire lifetime and then pass it on to their children, who also often planned to live in that same home. These days, very few people actually live in their homes for an entire lifetime and still fewer have children who plan on living there or even really need the family home after their parents pass on.

If we no longer have these as goals, the “Value Added” concept we looked at above would suggest it is important in retirement to separate the equity from the actual home. That we separate the home from equity  is to give it new life. Doing so gives us the opportunity to improve or maintain our lifestyle in retirement.

Why most retirees DON’T use their home equity in retirement:  While most retired homeowners would agree in theory with the idea of investing and growing the capital tied up in their homes to live a richer life, few will do so. Why?

The main reason is that most do not want the mortgage payment and the inherent repayment risk that comes with it.  When they weigh the pros and cons, they decide that, if for some unforeseen reason, they cannot make that repayment obligation they risk losing their home. In a word the rewards  just aren’t  worth the risk. The FHA Reverse Mortgage has changed this dynamic.

The Reverse Mortgage Solution: The FHA Reverse Mortgage gives retired homeowners the opportunity of separating the equity from  their homes without the repayment risk that accompanies a conventional mortgage.  They are able to access that equity and turn it to cash, with no obligation of a monthly payment. The remaining equity and growth in the market value of the home pays the mortgage for them.

If the home does not benefit from market appreciation sufficiently to pay the accumulated mortgage (making it a non-performing asset) the FHA has insured the homeowner through the Reverse Mortgage against this risk. Through the FHA insurance guarantee, the homeowner is protected from the risk of ever owning more than the home is worth.  If more is owed than the market value of the house, FHA is obliged to make up the difference to the lender.   Through the Reverse Mortgage the financial risk of a mortgage has been transferred to the house itself and the FHA.  It is no longer you and your income that is underwritten to repay the loan. It is the exclusively the house that is underwritten. For once the house is carrying its own weight.  It carries the responsibility of repaying the Reverse Mortgage instead of the burden of repayment being carried by you and your estate.

A Reverse Mortgage allows you to capitalize on your home equity in retirement without the risks:   With an FHA Reverse Mortgage we are able to separate equity from the home to improve our retirement cash flow and lifestyle without the many of risks of a conventional mortgage.

The FHA/HUD insured Home Equity Conversion Program offers home homeowners 62 years old and over a unique opportunity to use their home equity and turn it into a tax-free cash asset without the risk of default or asset depreciation inherent in a conventional mortgage. It gives life to inert equity by allowing you to stop sending your money to the bank in the form of payments. Instead you preserve your retirement cash-flow by eliminating a current payment or investing in a safe stable investment with an actual rate of return.  Home equity is serious money –  In retirement it’s time to take your home equity seriously.

For more information, please visit http://www.reverse-mortgage-quote.com

Many of us have read the best-selling, personal finance book Rich Dad Poor Dad by Robert Kiyosaki.  The book is a good read and is thought provoking, especially for a person 62+ who is considering how to use their home as a retirement asset.

“Rich Dad, Poor Dad” can be summarized as …rather than seeing an asset as something with value, [Rich Dad, Poor Dad] defines an asset as being something that generates cash flow. This means that, according to this book, technically, your home is not an asset.”

Let’s think about this for a bit. Is your home an asset?  An asset is by definition anything that has value, and we can all agree with that in the literal sense.  However, if we are to take Robert Kiyosaki’s view of an asset as anything that benefits us by generating cash or cash flow, we conclude that something that costs us money to own, that depreciates more than it grows in value, is not an asset.

This definition of an asset is financially liberating. It takes us out of the box we’ve lived in for years.  Suddenly our buying habits acquire a new definition.  Buying a new TV isn’t only buying a TV, but it’s adding a new liability. Putting money in the bank and collecting interest on it brings cash flow  -making it an asset. Making a payment on a house doesn’t produce revenue and it takes money OUT of cash flow. In short, it means the home is a liability. Maybe a necessary liability since we all need a place to live, but a liability nonetheless.

Back to our initial question: Is your primary residence really an asset or a liability?  We can all agree that when something has value, the traditional definition would make it an asset.  Few of us can afford to buy a home outright.  Normally we acquire a mortgage with 20% down and 30 years of repayment (which is taken out of income) on a property that requires constant maintenance and whose appreciation probably isn’t keeping up with inflation.

The reality is, if your home carries a mortgage, it is a liability when you analyze it from a cash flow perspective. We can’t forget that the mortgage is an asset to the bank that holds the note and it is a liability to the borrower.  For the borrower a home is a liability subject to innumerable risks and potential for loss:  Declining market risks, government monetary policy risks, inflation risks, weather risks, depreciation risks, default and foreclosure risks etc., and the list could go on.  All of these risks rest squarely on the shoulders of the borrower and most are out of his/her control.

On one hand, we can conclude that a home can be either an asset or a liability, depending on the financial benefit it brings the owner.  Your house is only an asset if it provides you with money or cash flow to provide a comfortable life for you and your family.  On the other hand, if owning your own home locks up investment capital, takes money out of your current income to make payments, and exposes you to the risk of potential depreciation and default, you can safely argue that it is a liability.

The Reverse Mortgage Solution:  For senior homeowners 62 years and older the FHA insured, Home Equity Conversion Mortgage( HECM), or a Reverse Mortgage,  fulfills all the Robert Keyaski conditions to turn a home from a liability to an asset.  With an FHA insured Reverse Mortgage you are able to receive in a lump sum; a very large percentage of your home equity in the form of cold, hard, investable cash with no monthly payment subtracted from your current retirement cash flow.

If you currently have a mortgage, a Reverse Mortgage will pay it off and eliminate the payment- putting the payment amount back into your monthly cash-flow.  The liability of making a payment is transferred to the house.  You home’s appreciation can make your payment for you. If it can’t – it’s probably a depreciating liability.   The Reverse Mortgage transfers risk of depreciation to the FHA through the insurance guarantees on the loan. You NEVER have to pay back more than the value of the home regardless of what you owe, transferring the risk of owing more than the home is worth into the FHA insurance pool.

With a Reverse Mortgage you are also freed of default risk, since you cannot default on a payment that you’re not required to make.

Conclusion: With the Reverse Mortgage your home gives you back cash you have invested in it, eliminates the payments, and transfers risk from you to the FHA. The Reverse Mortgage allows you to borrow your home’s equity as cash, eliminate monthly payments and enjoy all the benefits of home ownership without many of the financial liabilities.  The Reverse Mortgage turns your home into a genuine real estate asset.

Unfortunately for too long it is was looked at as a last resort, needs based product that you don’t consider until you have no other option. A perception encouraged by media that was ignorant of the product and self-serving politicians eager to score political points as “protectors of the senior” population.
That has changed and the years in the desert of negative perception is gradually ending. A new way of looking at home equity is evolving. Previous generations had looked at home equity as almost sacrosanct. The last port in a stormy financial sea. But as the baby boomer generation enters retirement age, the idea of home equity as a financial tool, as an asset to serve their needs as any other asset has taken the foreground. Even the new financial planner now look to reverse mortgage productions as a retirement planning took rather than a final last ditch option.
Recent article such as on the in the “Journal of Financial Planning” shows home owners how to integrate the Reverse Mortgage line-of-credit into the stock portfolio management. A recent “Time” magazine article talks about the Reverse Mortgage coming of age as well as a March 2012 Washington Post article showing the growing acceptance of the Reverse Mortgage.
In addition, a continuing education course program about reverse mortgages is now offered by the Certified Financial Planning board that will deal with the uses of, and misconceptions about Reverse Mortgages. Even the reverse mortgage nemesis AARP, is now partnering with a major lender to begin offering Reverses. These are just a few of the signs of spring as the Reverse Mortgage comes of age.
With a 2011 Gallup poll showing that 65% of retirees consider themselves financially unprepared to face the financial necessities of retirement, the Reverse Mortgage is invariably going to become more and more an avenue of comprehensive financial planning that a product of last resort. To review more information, please visit our site Reverse Mortgage Quote

Counseling
The Loan Officer will help you schedule a telephone counseling session with an HUD-approved counseling agency. By Federal Law, you must speak with an independent third-party counselor before you fill out the reverse mortgage application.
The counselor must talk with you about options other than a reverse mortgage, such as borrowing from family or friends, taking out a traditional home loan with payments, selling your home, or finding a house mate to share expenses, and also will discuss the various reverse mortgage options.

Application/Disclosure
After the counseling session is completed (about an hour) and you have determined that a reverse mortgage would benefit you, your Loan Officer will call you to answer any questions you may have and to schedule a time for you to fill out the loan application. Next our Pre-Processing Department will call you for specific information that is required for the application, such as your existing mortgage, copies of your Social Security card and picture ID, proof of counseling, and any additional information or documents that are needed.

The Pre-Processor also will confirm your appointment for one of our reverse mortgage consultants to visit your home and assist you with the loan application.

The application discloses to you the estimated total cost of the loan as required by the Federal Truth in Lending Act.

Reverse Mortgage Fast Facts

- All borrowers must be 62 years and older.
- No repayment is required until the owner sells, permanently moves out, or passes away.
- You own your home—the lender does not take control of the title.
- There are no credit orincome qualifications.
- Funds from a Reverse Mortgage may be used for ANYTHING you wish:
- Repay existing mortgages,
- Consolidate or pay down credit card debt,
- Supplement monthly Social Security or retirement income,
- Establish an emergency fund,
- Pay for medical expenses and prescriptions,
- Take a dream vacation or purchase a new car,
- Set up a college fund for your grandchildren,
- Make home renovations or repairs,
- Stop foreclosure proceedings.
- Social Security benefits and Medicare generally are not affected by a reverse mortgage.
- When the loan is due, your heirs have choices—they can repay the loan and keep the house, or sell the house to repay the loan.

The Application Process
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Processing
After we receive your completed application, the loan processor assigned to you will call you to let you know if we need any other documents or information. The Processor will tell you the name of the appraisal company (and pest inspection company if you live in Florida) and approximately when they will come to your home for the appraisal and inspection. Make sure your home is tidy for this detailed FHA appraisal, in which the appraiser will take pictures of both the inside and outside of your home.

The appraiser will verify that the condition of the property meets FHA guidelines. If any structural defects or safety issues are found, (in most cases) you will be required to hire a contractor to complete the repairs after the reverse mortgage closes.

Your Processor will review your payment options with you so you can choose the one which best meets your needs. After the loan package is submitted to the lender for final approval, your loan generally should close within three weeks if there are no issues with your title, appraisal, or inspection.

Closing
Once your loan package is approved, the Processor will call you to schedule the closing (signing) of the loan, which will take place at your home.

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Disbursement
After you sign the loan documents, you will have three business days to cancel the loan, after which the loan funds are disbursed to you in the manner you selected. If you chose a lump sum, the check will be sent to you via overnight mail the day after your loan funds. Any owed taxes, judgments, or existing debt on the home will be paid off for you and all necessary documents will be recorded at the local level. You may begin using the loan proceeds for any purpose you desire.
The loan service provider will manage your account and disburse funds to you in the manner you selected, either as a monthly advance or as a line of credit advance when ever you request. The servicer also will send you a monthly statement and verify that you continue to meet the residency requirements.

Repayment
You never are required to make any monthly mortgage payments during the life of the loan. The loan will be repaid by you or your heirs/estate, with or without the sale of your home, when you no longer occupy the home as a principle residence. You are protected from ever repaying more than your home is worth—the repayment obligation never can exceed the home’s value unless your heirs want to keep the home, then the full amount of the loan plus interest must be paid

Talking with Your Adult Children
Financial stress can be a difficult subject to discuss with family. Because of the potential effect on your estate, most financial advisors and reverse mortgage experts recommend that you include your family in the discussion, although this certainly is not required. Many individuals simply prefer not to discuss their finances with anyone, including their children.
Children of reverse mortgage borrowers often are relieved that their parents can use a resource that they already have—their home’s equity—to enable them to remain in their own home, care for their own needs, and maintain their independence. Many children support their parents’ decision to get a reverse mortgage once they understand how the program works. If you do decide to discuss your situation with your family, these tips may help the conversation to be well received.

Be Upfront – Tell your children about your financial condition. They might have no idea that their parents are having difficulty. Give them the facts about a reverse mortgage and explain how it can make your life easier. The tradeoff is simple—you receive an improved standard of living in your “golden” years at the expense of your estate.

Be Realistic – More than likely, much of the equity in the home will be used to pay off the loan balance, leaving little or no equity for the heirs.

Be Understanding – Your loved ones may not react the way you expect. More than likely they are only looking out for what they perceive to be your best interest.
Encourage your children to meet your reverse mortgage representative an your financial advisor, in person or through a conference call. Any competent, qualified lender will be more than happy to discuss your situation with your family—with your permission, of course.
Talking to Your Family
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Talking with Your Parents About a Reverse Mortgage
People are living longer, healthier lives and reaching retirement age no longer means growing old. Imagine if your parents could have the income they need to remain living comfortably in their own home, while at the same time making needed repairs, receiving quality home health care, or vacationing with family or friends.
For most seniors, living independently in their own home is extremely important. As the adult child, you want the peace of mind of knowing that your parents are able to take care of themselves without financial distress, using their own money and not adding any new bills to their monthly obligations. They maintain their dignity and independence, and best of all, they retain title and remain living in their own home.
Approaching a parent or loved one about their finances can be awkward, but try to find out if they can afford to eat well, pay their bills, get quality health care, and enjoy the things that bring them happiness. Here are a few suggestions that can break the ice and create an effective dialogue:
Be Positive and Think Ahead: Bring up the subject of their future needs when your parents’ lives are going well, rather than during stress or crisis. Discuss the topic as early as possible, so a plan will be in place when a crisis does happen.
Involve Family: It is up to you and your family whether you want to include your siblings in the conversation, but at least consider informing them of the situation, to prevent hurt feelings or opposition later.
Don’t Push: Allow your parents to make their own choices and resist the temptation to push the issue unless their health or safety is in jeopardy. Show understanding by focusing on your parents’ needs, desires, and worries about their current and future living situation. Compare the costs and benefits of remaining in their home with that of an assisted living facility.
Ask, Know, and Share: Before you offer your opinion, learn what is important to them—their goals, needs, and concerns about their current and future situation. Ask what kind of assistance they would prefer in order to stay in their home. Share your own goals and experiences. Knowing that you are there to help might make it easier for your parents to accept help themselves.
Know Their Health Status: Be aware of any health problems and if your parents have the long term means to manage both routine and unexpected health care needs. Can they afford their medications? Can they make it okay to medical appointments? Do they need in-home care?
Know Their Home: Take notice of the condition of their home. Does it need important repairs? A new hot water heater or roof? Consider safety issues or modifications (hand rails, ramps, etc.) that can make their home more accessible and comfortable.
Research Community Resources: Look into community services that may help your parents to remain independent, such as public transportation, Meals on Wheels, shopping services, or other home care services.
Show Understanding: Be respectful of their opinions, even if you hear answers that you weren’t expecting or don’t like. Talking about change can be met with negativity, even when the change is for the better. Asking for help can be difficult for anyone. Stay positive and focused in the midst of emotions.
Seek Professional Advice: If you continue to have difficulty talking about your parents’ long and short-term finances, consider seeking the advice of a neutral professional such as a financial planner or attorney.

Each person has a unique financial situation and needs. As such, you cannot be pigeon-holed into one type of loan. If your needs are not assessed correctly you may choose the wrong reverse mortgage, simply because the other options either were not discussed properly or were not discussed at all. Although on the surface this mistake may seem obvious, the financial ramifications of knowing your reverse mortgage options can be huge. Make sure your loan officer thoroughly discusses multiple loans with you and how each can affect your financial position.

If you receive Medicaid or SupplementalSecurity Income (SSI) benefits:

You pay no taxes on reverse mortgage proceeds because the IRS does not consider loan advances to be income. Your Social Security and Medicare benefits also are not affected.

That being said, if you receive SSI, Medicaid, food stamps, or other public assistance, loan advances are counted as “liquid assets” if you keep them in your bank account and don’t use them right away. If your assets are greater than these programs allow, you could lose your eligibility. This is why many seniors choose to receive the reverse mortgage proceeds as a line of credit, because they can take money out as needed and spend it immediately, so it cannot be counted as an asset. You should discuss these issues with a trusted professional who understands these government programs.

Selling Your House in a Short Time:

A reverse mortgage is an excellent solution to many financial situations, but not all. If you plan to sell your house soon, getting a reverse mortgage may not make sense.

As with any mortgage, there are closing costs. The closing costs for a reverse mortgage are spread over the loan’s duration, making the loan “cheaper” the longer you keep the house.

A reverse mortgage is ideal if you plan to stay in your home for some time, but if you plan to relocate in less than three years, the cost of the loan can outweigh the benefit. There may be cheaper alternatives to accomplish what you need.

Be Aware of Cross Selling:

Some lenders have ties or principle interests in companies that sell other financial products such as annuities, stocks, or insurance. Make the decision that is right for you if you felt that you’re being pushed into other financial products. Seek the advice of trusted advisors to make sure you are doing the right thing. A sure way to avoid a conflict of interest is to get your reverse mortgage from a lender that does not sell any other financial product.

Your Right to Cancel:

With most reverse mortgages, (other than the HECM for purchase) you have three business days after closing to cancel the deal for any reason, without penalty, by federal law. To cancel, you must notify the lender in writing by fax or certified mail. This protects you if, for any reason, you have second thoughts that a reverse mortgage is not the right choice, or if you have concerns about the lender, the terms, or the fees. However, before sending the notice, you should discuss it with your lender, because if you send the notice, and then change your mind and decide to continue, some lenders may require you to start all over again.

Know Your Responsibilities:

Because you still are the owner of your home, you still are required to pay for property taxes, homeowner’s insurance, and home repairs. Make sure you set aside some money to pay for these responsibilities. Ask your loan officer what is the lender’s policy on maintenance and repair. You may want to take enough money up front to make future repairs so that your monthly cash advance will stay the same.

Include your Family in the Decision Process:

Don’t leave your family out of the process of getting a reverse mortgage, especially grown children. Try to get consensus or at least include them during the education process. A reputable lender will welcome speaking with your family members, but it may do so only with your permission.

Get Professional Advice:

Consider discussing the benefits and disadvantages of reverse mortgages with your financial planner or real estate attorney. You can avoid pitfalls if you have an impartial party clearly explain the consequences.

Things to Watch Out For:

- Sales tactics involving the required or suggested purchase of annuities, other investments, long term care insurance, or other insurance with proceeds from the loan.
- Sales tactics involving contractors looking for proceeds to pay for home repairs.
- Being advised to transfer the property’s title out of your or your spouse’s name to qualify for the loan.
- Being advised to have loan proceeds payable to a third party, and not you as the borrower.
- Estate planning services that offer to refer you to a lender for a fee or percentage of the loan. You can obtain information on lenders from HUD at no cost.
- Pressure to draw down all of you available equity into a single upfront disbursement. You’ll need money in the future to keep current with your home’s taxes, insurance, and maintenance.

Some Words of Advice:

- Obtain independent legal and financial advice prior to signing loan documents.
- Discuss the loan with trusted family members.
- Know that reverse mortgage loans cannot have prepayment penalties or restrictions. Loans must be able to be repaid in full or in part at any time without penalty.
u Understand your obligations to pay your taxes and insurance and to maintain the property in satisfactory condition. Failing to do so may constitute default and lead possibly to foreclosure action.

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What do you want to accomplish? Homeowners typically refinance their homes several times in the course of their lives looking for lower interest rates. However, once you reach 62 years of age and qualify for an FHA-insured reverse mortgage (Home Equity Conversion Mortgage, or HECM), you suddenly gain new options that make the interest rate only one of your considerations. You should ask yourself, what do I want to accomplish with a refinance as a 62+ homeowner? You still may be working, but are looking ahead to retirement; or you’ve already retired and are looking forward to enjoying your life and family. You also should consider your need for cash and your ability to make monthly payments if you refinance.

Qualifying for a refinance as a retiree can be difficult. If you are like most homeowners, you took out your initial mortgage when you were working. However, after you retire and your income changes, meeting the income qualification for a home loan can be next to impossible, especially in these days of credit restrictions by banks. Many retirees do not meet the credit or income requirements to qualify for a conventional refinance. Fortunately, a homeowner 62 or over can refinance his or her home at a low interest rate using a reverse mortgage—because it has NO income qualification, NO credit qualification, and NO required payments for as long as you continue to live in your home.

A reverse mortgage offers choices and options. You want to make a payment? It’s never a requirement, but that’s great! You can make a payment on your reverse mortgage whenever you want and in the amount that you want—on the principal, the interest, or a combination of both—it’s your choice. YOU, not the bank, choose what works best for you depending on what you want to accomplish and what your cash flow needs are during any particular month. Nevertheless, remember that the major benefit of a reverse mortgage is that you do not have to make ANY payment, and the loan plus interest does not come due until the last homeowner moves out of the house or passes away. If you have a lot of bills this month, then don’t make a payment—and the bank won’t mind. You are completely in control because it is your choice of when, how much, and IF you make a payment toward your reverse mortgage. Do you need an emergency fund or extra money now and then to make ends meet? Or do you just want to have some fun? No problem. With a reverse mortgage you can do just that.

Refinance your current mortgage with a reverse mortgage. Once you “refinance” your current mortgage using a reverse mortgage, you can set aside the remaining equity into the line of credit that is built into the loan. With the HECM the line of credit grows no matter what your home’s value does. Let the equity sit there and grow and use it when and if you need it. Your home equity can become your emergency fund or even your entertainment fund. As incredible as it seems turning 62, it opens the door to this surprisingly versatile refinance option—the congressionally mandated and FHA-insured HECM reverse mortgage. It allows you to never make another mortgage payment for as long as you live in your home, with the freedom to make payments when and in whatever amount that YOU choose. A reverse mortgage financially empowers your retirement!

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1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets homeowners convert part of their home’s equity into cash to supplement their income. The equity the homeowner built up over years of making mortgage payments can be received as a lump sum, in a stream of payments, or as a credit line that the homeowner can draw from whenever he or she desires. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrowers no longer use the home as their principal residence. The most popular reverse mortgage is the Home Equity Conversion Mortgage (HECM), guaranteed by the Department of Housing and Urban Development (HUD) and insured by the Federal Housing Administration (FHA).

2. How do I qualify for the HECM?

To be eligible for a Home Equity Conversion Mortgage, FHA requires that you be a homeowner age 62 or older, either own your home free and clear or have a small to medium-sized outstanding mortgage balance, and that you speak with a HUD-approved counselor to make sure you understand how a reverse mortgage works.There are no income or credit requirements.

3. What if I didn’t buy my home with an FHA mortgage?

Your property must meet FHA minimum standards, but it doesn’t matter if you didn’t buy it with an FHA-insured mortgage.

4. What if I own a condominium?

You still can qualify for the HECM. As long as the property is your principal residence, it can be a single-family residence, a one-to-four unit dwelling with one unit occupied by the borrower, a manufactured home, or a unit in an FHA-approved condominium or Planned Unit Development. Although your property must meet FHA minimum property standards, you can pay for repairs with your reverse mortgage.

5. A reverse mortgage or a bank home equity loan?

To qualify for a traditional second mortgage or home equity line of credit, you must have sufficient income and good credit in order to make the required monthly payments—and if you fall behind, you could lose your home. The reverse mortgage is completely different. Instead of making monthly mortgage payment, you receive payments, and because the loan doesn’t have to be repaid for as long as you live in your home, there are no income or credit requirements. Of course, like any homeowner you still are required to pay your taxes, insurance, utilities, and keep your home in good condition. The key distinction is that with an FHA-insured HUD reverse mortgage, you cannot be foreclosed upon or forced to vacate your house because you “missed your mortgage payment.”

6. Can the lender take my home away if I outlive the loan?

No! HUD guarantees that you will receive all the payments that are owed to you, even if you live longer than your available funds. The loan balance grows to exceed the home’s value. You cannot be forced to sell your home—and the lender cannot take your house from you—in order to pay off the reverse mortgage.

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

When you die, sell your home, or no longer use it as your primary residence, you or your estate will repay to the lender the cash that you received from the reverse mortgage, plus interest and normal finance charges. All proceeds beyond what you owe belong to you or your estate, meaning the remaining equity can be passed on to your heirs. Your heirs can choose to keep or sell the house, so long as the loan is repaid. If they want to keep the house, they can get a mortgage of their own or use their own funds to pay back the loan. If they don’t want the house, they can sell it to repay the loan and keep any money that remains. None of your or your heirs’ other assets are affected.

8. How much money can I get from my home?

It varies, but in general, the FHA will allow you to access approximately half of your home’s value. The FHA uses a formula based on the age of the borrowers, the appraised value of the property (up to a cap determined by FHA), and the interest rate. The amount determined by the formula first will be used to pay off your current mortgage and the remainder will be available for you to use for anything that you wish. Your reverse mortgage representative can give you a quote tailored specifically for you.

9. What if I want to take out more equity from my home than the FHA lending limits?

Like the FHA “forward” mortgage program, the FHA reverse mortgage is intended primarily to benefit low-to-moderate income households in low-to-moderate value homes, though any homeowner who meets the simple qualifications may participate. The amount you can borrow will be limited by the FHA lending limit. A homeowner whose property is valued will beyond the FHA lending limit, and who has a large amount of equity, might not receive as much cash from a HECM as they could from another reputable private or public program.

10. Should I use an estate planning service to find a reverse mortgage? I have been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan.

HUD does NOT recommend using an estate planning service or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved counseling agencies are available for free or at minimal cost, to provide counseling and free referral to a list of HUD-approved lenders.

For more information and a FREE QUOTE, please call toll-free1-888-302-5565 or visit: http://www.seniorsretirement.com

It is important to do your homework before deciding if a reverse  mortgage is right for you. There are many things to consider. Call Toll Free  1-888-302-5565 and we will be happy to help you with all of your questions and concerns.

Doesn’t it seem like every time you turn on your television or open your newspaper, you see an advertisement for a new financial product? The industry is constantly hard at work coming up with new ways to help you manage your money, boost your income and invest more.

A good chunk of these new products fall flat. But every once in a while, one will take hold in a way that even the experts didn’t see coming. To me, that means it’s time to look under the hood, kick the tires and really get a sense of whether that particular product is for you before you buy into all the hype. These days, that hype is about reverse mortgages.

Designed for people 62 and over, these mortgages — which in fact aren’t all that new, but have just recently taken off — enable you to have a bank buy back your home while you’re still living in it. It provides an income that you can opt to receive in a lump sum, a monthly payment or a line of credit that you draw upon when necessary.

Sounds kind of like winning the lottery, right? Not quite. You have to pay the money back (plus interest) when you vacate or sell the home, and there are fees involved. Still, these mortgages do have a place, and they’re rapidly finding it.

We would like to cordially invite you to seniorsretirement.com where we provide you with all of the information you need in order to make an informed decision as to whether a reverse mortgage is right for you. Toll Free 1-888-302-5565

Here’s what you need to consider before you (or your parents) join the reverse-mortgage frenzy:

Your age. These mortgages aren’t for everyone, but the older you are, the more likely you are to benefit from one. For one, you probably have more equity in your home. But the other reason is this: Banks calculate the payout based on not only the value of your home, but your age and average expected length of life.

“If you’re 75, you could get a much more adequate stream of income than if you’re 65. That’s because the bank would estimate that if they’re starting to pay at 65, they’ll have to pay for a longer period of time,” explains John Rother, group executive officer of policy and strategy for AARP.

Your situation. A reverse mortgage probably isn’t for you if you’re not planning to stay in your home for a long time, so consider that upfront. Then think about other factors related to both your current and future lifestyle. People get these loans for a variety of reasons, says Peter Bell, president of the National Reverse Mortgage Lenders Association. Some do it to finance an active lifestyle in their retirement, others because the home needs to be repaired or updated with health care equipment.

“Let’s take a 75-year-old widow who’s lived in this home for some time, but it needs substantial repairs. If she doesn’t have any other way of financing those, then a reverse mortgage might be an appropriate way for her to stay in the home, keep it in good shape, and continue to enjoy it,” explains Rother.

Note: If you’re hanging on to this home not for your own pleasure or comfort, but because you think your children will want to live in it some day, have a discussion to make sure that’s the case. If it’s not, consider downsizing to something smaller and more manageable.

The alternatives. As I mentioned, one might be moving into a smaller, less-expensive home or cutting back on your expenses. But if you’ve made all possible cuts to your budget and still need some extra income, do some research into benefit programs you may be eligible for, either from your state, the federal government or your former employer. You can also look into a home equity loan or line of credit, depending on if you need the lump sum or just want to have some money available in case of an emergency. The one silver lining of the probable recession is lower interest rates. HELOCs are more attractive today than they’ve been in two and a half years.

The fees and interest rate. These mortgages are paid back when the home is sold, typically as a result of the borrower moving or passing away. The fees, also paid at that time, tend to be higher than those associated with a traditional mortgage. Bell says the exact figures vary by product, but typically average 5 percent of the home’s value.

“When they sell, what they owe is the sum of the funds that have been advanced, the fees that were associated with the loan, and any interest that was accrued on it. But that’s capped by the value of the house,” explains Bell. If the amount owed is more than the value of the house, the lender eats the difference. If it’s less, you (or your heirs) keep the change.

The lender. There aren’t a ton of banks out there offering reverse mortgages, but you still need to make sure you work with a reputable one. First thing to know? By law you’re required to seek independent counseling before you sign on the dotted line. Your bank should give you a list of counselors in your area who can help you sort through the nitty-gritty and determine if the lender — and this product — is right for you.

SeniorsRetirement.com has an experienced staff that can guide you through the entire process and answer all of your questions. Our brokers can arrange meetings with lenders in your area and are happy to discuss all of your options. Toll Free 1-888-302-5565 ext.101

If you decide to seal the deal, stick to what you came for. Lenders may try to layer on other products, like long-term care insurance or annuities, that you just don’t need. The presence of this practice was among the findings of the AARP survey, says Rother. “With any mortgage you’ll be pitched a home warranty, home repair services, maybe health insurance or financial accounts. Some are quite legitimate and others are not.” As a consumer, it can be hard to make the distinction, which is why a third-party counseling service is so important.

Article credit:
Jean Chatzky
TODAY.com contributor