Recently there has been a considerable amount of conversation regarding the Reverse Mortgage. Today I had the opportunity to attend a continuing education class totally on Reverse Mortgages. Due to some misunderstandings by myself among many others I thought it my responsibility to provide the facts and let you the educated consumers decide if this could be a good match for you and your situation. This forum may not answer each and every question that you have concerning a reverse mortgage but I promise together we will get you the answers to help you with your decision.
What Is A Reverse Mortgage?
A reverse mortgage is a loan against your primary residence that you Do Not have to repay for as long as you live in your home. Through a reverse mortgage you turn the equity in your home into cash without having to sell your home or repay the loan. The funds that you receive can be done in one of several ways or possibly a combination of several of the ways:
• A lump sum distribution at closing
• A monthly cash advance
• A credit line for you to draw from as you need the funds
What Are The Requirements?
Qualification for a reverse mortgage is totally different from what we are all used to in qualifying for any type of loan. First of you do not have to have an income. Remember you do not make a monthly payment so you do not have to have an income. What about a credit score? It doesn’t matter. Your credit report will be accessed but only to verify that you do not have any federal tax liens against you. If you do have federal tax liens they must be cleared in order for the reverse mortgage to go into effect. They can possibly be cleared with funds at closing from the proceeds of your equity. What you do have to have is age. The minimum age requirement is 62.
What About The Horror Stories?
We all hear horror stories of people being taken advantage of. Many times these horror stories involve unscrupulous vultures taking advantage of senior citizens. This could be an arena for that to occur in were it not for an ethics commitment by concerned lenders. Understand first that a true reverse mortgage is a FHA Insured Mortgage. Until maximum amounts exceed $417,000 they will continue to be FHA. Equally important is the fact that lenders that are truly concerned with your wellbeing will be members of NRMLA, the National Reverse Mortgage Lenders Association. Under the NRMLA Code of Ethics members are held responsible for the actions or failure to act by officers, directors, employees, agents and representatives. This Code of Ethics focuses on the following values:
• Fairness
• Confidentiality
• Integrity
• Competence
• Diligence
• Professionalism
To insure compliance “secret shopper type” calls are made to participating lenders.
What About Purchasing a Home?
Currently the reverse mortgage product is only available for the refinance of an existing primary residence. This is changing as this article is being written. One of the provisions of HR3221 – Housing and Economic Recovery Act is that effective on January 1, 2009 a reverse mortgage can be used to purchase a primary residence. So after the first of the year it will be possible to utilize this product for either a refinance or a purchase.
More To Come
This is the first in a series of articles on Reverse Mortgages. Stay tuned for insight into ways to use a reverse mortgage, pitfalls of reverse mortgages, costs associated with reverse mortgages and any additional pertinent information that will help in understanding this product.
{ 5 comments… read them below or add one }
I loved the article on Reverse Mortgages. I agree that we need better information out there because this
is a product that can truly help Seniors (like myself).
Thank you for putting so much information together. I
look forward to further information.
Barbara
Hi Barbara and welcome. I appreciate your kind words and hopefully you will be as pleased with the future articles. I anticipate having a new article on reverse mortgages every few days over the next week or so, until I run out of topics. Is there any particular topic you would like to see discussed here? I hope to be able to put up some examples of how a reverse mortgage can benefit seniors.
The Reverse Mortgage is one of the greatest resources available to Seniors of every socio-economic group. I have seen the relief in the eyes of people who did not know how they would cope financially with the effects of the market on their life long savings. I have seen the disbelief and gratitude in the eyes of Seniors who have gotten used to doing without. I have seen the wonder in the eyes of folks who were able to buy a second home without the burden of a mortgage payment.
I am so proud to have a career that offers me the honor of offering this service.
No person who has worked so hard to have a home should have to do without life’s pleasures in the retirement years.
Can you write about the misunderstandings you had that were answered during the class and what were other questions from the other participants that they thought were different. Its interesting that many financial planners and attorneys do not have a clear idea of how these loans work and its refreshing to get their opinion when they realize so many of their opinions were incorrect. Keep us posted.