||June 21st, 2007|
Reverse Mortgages . . .
with Laura Strickler
Laura Strickler -
Your Reverse Mortgage Specialist
Living in Reverse
If you are a senior, no doubt you are receiving mounds of mailers (deceptive and otherwise) informing you of reverse mortgages and how they can change your life. So, how do you decide which program is right for you?
That's where the numbers come in. There are three government insured reverse mortgage programs. The Home Equity Conversion Mortgage (two versions- a monthly adjustable and an annually adjustable) designed by the U.S. Department of Housing and Urban Development (HUD) and insured by the Federal Housing Administration (FHA). The Home Keeper is Fannie Mae's proprietary reverse mortgage and, of course, is backed by Fannie Mae.
Of these programs, the monthly adjustable Home Equity Conversion Mortgage (HECM) program is the most widely used. The reason seniors choose the monthly adjustable program over the annually adjustable version is that the program offers more money. And, after all, that's the main goal in obtaining a reverse mortgage. The closing costs are the same as the annually adjustable, but the interest rate used in calculating how much money you receive is lower, which nets you more cash.
FHA's two HECM programs offer a wide flexibility of payment options to the senior. You can receive your money in monthly advances, a lump sum of cash or leave it in a line of credit. You can also take your money in a combination of all three options.
Once your loan is in place, you also have the flexibility to change the way you receive your money. You simply place a call to the customer service center and tell them what you want to accomplish. They will send you the necessary documentation, you sign the paperwork and send in a small fee (typically $20) and then your payment plan will be revised.
With the Fannie Mae Home Keeper program, you also have the same type of flexibility. Although, if you opt to keep your money in a line of credit, there is no growth offered on the funds you have there. The Home Keeper also offers less money to you than the FHA HECM programs.
The amount of money you are allowed to borrow is determined on three items: age, property value and/or lending limit (whichever is less), and the expected interest rate. But, on the FHA HECM programs, the age is based on the age of the youngest borrower. With the Fannie Mae Home Keeper, it is based on the combined ages of borrowers.
The FHA HECM programs can be obtained on the following property types: one- to four-unit dwellings, condos (if approved by FHA), planned unit developments (PUDs) and manufactured housing (must meet FHA guidelines). The Fannie Mae Home Keeper program will accept single family residences, condos (if approved by Fannie Mae) and units in a planned unit development (PUD) (if it meets Fannie Mae's requirements). I can assist you in determining whether or not your residence would be acceptable if you are unclear.
As I mentioned in last week's column, reverse mortgage counseling is mandatory for each of these loan programs. A HUD approved reverse mortgage counselor must speak with you and review the available programs. The counseling may be conducted in person, but more and more the counseling is being conducted over the telephone. The session lasts approximately 45 minutes to an hour. Your counselor is willing to have other family members teleconferenced into your counseling session.
As always, please call me with any questions you may have. I am here to help you determine whether or not a reverse mortgage is right for you.
Laura Strickler, CSA