||July 12th, 2007|
Reverse Mortgages . . .
with Laura Strickler
Laura Strickler -
Your Reverse Mortgage Specialist
Living in Reverse
Reverse mortgages are a great way for seniors to enjoy their golden years. That may mean more money for daily living expenses like medications or the necessities of life. That may mean providing a line of credit for an emergency fund. That may also mean remodeling a home to make it more senior friendly. The uses for a reverse mortgage are as different as the seniors that get them. While the reverse mortgage is a terrific way to help you realize the kind of retirement you want, the reality is that they are not free.
We all know that saying, “there's no such thing as a free lunch.” Well, with reverse mortgages, there are certainly fees that go along with the transaction. They include all the normal fees associated with a typical mortgage: origination fees to the lender, the escrow and the title company, the appraiser, recording fees and others. Even though you are never required to make monthly payments on your reverse mortgage, the loan is accruing interest on any money that you have used. That is the amount that will be due when your loan is paid off: any funds you have used (including the closing costs) plus the accrued interest. There is no pre-payment penalty associated with conventional reverse mortgage programs. I always let my clients know that if the intent is to stay in the home for just a couple of years, a reverse mortgage is not the right choice.
If, however, you do want to spend many more years in the home and neighborhood you love, a reverse mortgage can help you live the way you want. The loan amount varies from senior to senior, because it's based on the current lending limit ($362,790), the current interest rate (6.15%) and the youngest borrower's age. So, if you have a home valued at $500,000 and you are 65, you would receive approximately $203,602, before closing costs. You would receive that same amount of $203,602 if your home appraised at $400,000. That's because anything over the lending limit of $362,790 does not affect the loan amount on the Home Equity Conversion Mortgage (HECM).
So, at this point you may begin to think a reverse mortgage is right for you. You can call me to review your situation and I will put the figures together for you with additional relevant information on the program. The next step I recommend is for you to contact a HUD approved reverse mortgage counselor. I feel this is a great next step because, #1, it's free and #2, it's an FHA requirement for the HECM loan. The counselor is independent of any lender. She will review the figures I've presented to you, and review the different reverse mortgage programs. She will also want some basic information regarding your monthly budget. The counseling requirement is there for your protection. The counselor needs to determine that you do understand the program itself. At the end of the session, she will issue you a counseling certificate and mail it to you. You can apply for your loan prior to your counseling session, but your loan will not begin the processing stage until the counseling is completed. If you are looking for a counselor, I will be happy to give you contact information for a local counselor.
One important thing to remember is that this program has government protections in place for your benefit. The lending limit, the fees, the counseling requirement are all protections for you. Don't forget, things are changing constantly in this field, so call for new program information!