Reverse Mortgage Information Center

There are three factors that determine how much money you get when doing a reverse mortgage. In this article, we will address those.

1. Your age. You have to be at least 62 years old when qualifying for a reverse mortgage, but will being older be a benefit on how much equity you can use? If interest rates and property values remain stable, you will benefit, but I don’t think it makes sense to wait. Small increases in interest rates will have a negative impact, larger than the benefit of being a few years older.

I want to talk about the exception to what I just said. The exception: If you are 62 or older and your spouse isn’t, should you wait until they are? The answer is most definitely, “it depends”. If you are in a hardship, or times are tough enough where you feel you could lose the home, it probably makes sense to do it now. Also, if the younger spouse has plans to sell upon the passing of the older spouse, it may make sense. The concern is that if you are not on the loan and your spouse passes away, you will be required to pay off the reverse mortgage or refinance it or sell. This can obviously be bad for you. Remember this: Don’t remove a person from title to get more money. Unless you are avoiding a hardship, it just doesn’t make sense.

2. The interest rates. Interest rates are at an all time low. Fixed rates are in the low 5’s. An interest rate hike of a percent or more could mean thousands of dollars less that you receive. Do you want to gamble with what the rates will be in 3 or 4 years?

3. How much is your home worth? Since the loan amount is based on the value of your home, you may be better off using today’s value, rather than hoping the value will increase enough to matter over the next several years. Trying to guess what your home will be worth in three years is pretty hard to do. Several clients waited a couple years to do a loan, only to be in today’s market with lesser values than they could have ever imagined. With those kind of decreases, you may have trouble getting qualified at all.

If it works, why would you wait? What are you hoping for? If the numbers work today, just do it. Use a reverse mortgage to enhance your retirement today, with real numbers that you can use, based on today’s interest rates and values. If you would like to see what you qualify for, try our FREE reverse mortgage calculator.

How much a reverse mortgage costs is one of the top arguments against doing one. Often, I hear: “they are too expensive”. My reply would be: “compared to what”?

Let’s look at what some alternatives are: You could move, but what would be the cost of moving? While you probably could get a quote for moving your household, what price can you put on the emotional cost? When you have lived on your home for several years, if not decades, you have everything where you want it. You know where it is and the memories run deeply. So is it worth moving, and turning your entire life upside down? If you do move, there are more things to consider.

Do you want to have a rental? If you move out of your home, are you going to rent it out? If so, there will be a time investment to manage the property. You will probably have repairs that need to be done and the hassle of screening tenants and hoping to get a good one.

You might be saying that you would sell your home and renting it out doesn’t make sense. If you actually looked up what it costs to move, the next step will be a little easier. You just take the cost of moving, and then add the real estate commissions to that. Real estate sales commissions run 5%-6% of the sales price, and you will probably pay some or all of the closing costs for the buyer. Just to be clear, there are times when selling is the best option for all parties. I am just pointing out that there are expenses in doing so.

So what are the fees associated with a reverse mortgage? Depending on your loan officer, the cost of a reverse mortgage is somewhere between 2% and 5% of the appraised value. You can see that it is actually cheaper to do a reverse mortgage than it is to sell. It is easier than moving, and you get a place to live for the rest of your life. To top it all off, the fees have been drastically reduced, and the interest rates are at an all time low.

Of Course, there are always exceptions. If you are moving in a few years, it likely won’t make sense to do a reverse mortgage. I am not speaking of thinking someday you may move. I am talking about you having a plan to move in three years to a warmer, dryer city and knowing you are going to do it. In other words, have a definite plan.

Looking for more information on reverse mortgages? Getting educated on the reverse mortgage programs available may go a long way towards helping you make your decision. If you would like You can see what you qualify for using our FREE reverse mortgage calculator.

Redwood Financial Services wants to make sure you have all the facts, so you can make an informed and educated decision. The five most common questions are listed below so you can start understanding the reverse mortgage loan.

1. Can I do a reverse mortgage if I owe nothing on my home? This may sound obvious, but absolutely. This allows for more available cash to take care of any non mortgage obligations you may have.

In the event your home is not paid off, you still could qualify for a reverse mortgage. Your mortgage will have to be paid off first (with the reverse mortgage) then any remaining proceeds can be taken as a line of credit, monthly income, or a lump sum.

2. Can I do a reverse loan if I am behind on my taxes? This is a great reason to use a reverse mortgage. It will allow you to get caught up on any past due bills and get those creditors off your back. You could consider deferring your property taxes if you live in Oregon, after the loan closes.

3. Do I have to give up the title to my home? You will use your home as collateral for the new loan. You do not give up your home. You retain all the rights to refinance or sell, and the remaining equity is always yours or your heirs’.

4. Do reverse mortgages allow me to purchase a home? In January of 2009, there was a program introduced to allow a purchase of a home with a reverse mortgage.

5. What if I use up all my equity? When considering property appreciation and the low rates of a reverse mortgage, it takes quite a while to “use up” your equity. On an average it will take 20-30 years to go through it. In the event you actually use up all the equity in your home, you will never be forced to move. You’re protected with a place to live for the rest of your life.

Stop by our website if you would like to see more frequently asked questions and answers about reverse mortgages. You will find a large amount of educational information for free. Get informed before you make your decision.

1. You don’t get to write-off your mortgage interest:

a. Remember the 1099 form you get that shows how much interest you paid? You won’t be getting that after you complete a reverse mortgage. Since you have accrued interest and not paid interest, there is nothing to write off. Once you pay the interest, you will get the write off, but normally that occurs when the home is paid off.

b. Is the interest write off more important than not having house payments? Would you prefer to have the write off or no payments?

2. Accruing interest or your balance growing:

a. Interest accruing on your loan without making payments means the amount you owe on your loan will increase over the life of your loan. The interest that is charged monthly is added to your balance, making it get bigger each month.

b. No payments today in trade for a bigger payoff tomorrow. Most reverse mortgages are paid off when the borrower passes away, so they have permanently deferred the monthly payments.

3. Reverse mortgage fees are expensive:

a. Reverse mortgage fees are expensive when compared to a regular home loan. since there are no monthly payments on a reverse mortgage, but you do have payments on a normal loan, maybe “they” think there is some justification for higher fees.

b. New programs have recently been released that have cut the cost of a reverse mortgage in half from what they used to be. If you didn’t do a reverse mortgage before because of the cost, check again. You will be surprised on how much the fees have been reduced.

4.You leave less money to your kids:

a. It will reduce the amount you leave as an inheritance, if you spend your equity. This could be really important to those who want to leave a sum of money to their heirs, but there are alternatives to how you leave the “money”.

b. Are you really depriving anyone by spending your equity? If you have a mortgage, and you remove the monthly expense, this will leave you more cash to save or spend to maintain your independence. Your heirs may not have to chip in to help you survive. That alone saves them money and enhances their future retirement. If you have no mortgage, getting monthly income or a lump sum of money will help take care of your home and medical expenses.

You will see there are two sides to these so called “reverse mortgage disadvantages”. Just weigh the objection against the need to see if the loan makes sense to you.If you would like to bounce some ideas off of someone, email me or give me a call. You can get my contact information online at www.redwoodreversemortgage.com. You will also find a lot more information on reverse mortgages there.

Have you heard other reverse mortgage disadvantages? Follow the links if you are looking for more reverse mortgage information. You can get a free education with no obligation. You can even use our reverse mortgage calculator for free.

Reverse mortgages allow you to access your home equity four different ways. We will examine those ways so you know how to access your reverse mortgage equity.

1. Lump Sum – You have the option of taking all the funds available to you at one time. You can use the money for anything you want, but the most common use is paying off the existing mortgage (if you have one) on your home.

2. Monthly Annuity – Not a true annuity, but a monthly amount of money that is guaranteed to continue as long as you or your spouse lives in the home. Wouldn’t retirement be more comfortable if you had a little more money each month? There is also a tenure option that gives you a larger payment for a specified period of time. More common though, is the lifetime payment.

3. Credit Line – If you don’t need the money today, and you want to have a reserve account for emergency, this is probably the option for you. There is no interest being accumulated unless you use the money. It will only be charged if you actually borrow it.

4. A Combination of the Above – You can customize your loan to combine any of the above options. If you need a small lump sum, a monthly boost to your income, and you want the rest to be in a line of credit, mixing and matching is the way to go. Additionally you can alter your plan anytime you want to get more monthly or get an additional lump sum for a small fee.

If you choose anything other than a lump sum, know that you will have to take the adjustable rate mortgage (ARM). There is only one option if you choose the fixed rate. It is a lump sum. You will have to draw it all when your loan closes.

Prior to committing to any reverse mortgage programs, make sure you have all the facts. Visit our website for more reverse mortgage information. There is also a free reverse mortgage calculator to see how much money is available to you.

Your mortgage is likely to be the largest loan you ever take out. At 30 years it will also be the longest loan you ever take out. When you consider those 2 points then it makes sense to take some time to learn at least the basics of the process that you will go through to get the loan that allows you to buy the house of your dreams.

A mortgage is the name given to the loans used to buy real estate, whether it is a single family home, a duplex or even a piece of land you would still be getting a mortgage. The mortgage uses the property as security, so if you stop paying the bank or mortgage lender they can take over ownership of your house or property against which you borrowed. This is one of the reasons why you should not buy a house that is more expensive than you can really afford.

Buyers generally have a decision between an FHA or conventional loan unless they are a military veteran in which case they may qualify for a VA loan. VA loans are the only 100% loans available today. FHA loans usually involve a small down payment while conventional ones are the toughest to qualify for if you have any credit issues.

Cash is king, thsi may seem a strange comment to make when you are looking to borrow money to buy a house, presumeably because you don’t have enough cash to buy one outright. The fact is that the more cash you have to use as a deposit the better you will be, the only way to get a 100% loan currently is to get a veterans loan. If you have never been in the armed forces then this option is not open to you, so you need to have a deposit. FHA loans can require as little as 5% while traditional loans are now often requiring a 20% deposit.

Knowing your debt is very important. If you have lots of small monthly payments going out to various loans, credit cards and store cards this may damage your credit. Pay the ones you can off, especially if they have a high or variable percentage charge. Showing that you are in control of the debt you have will make it a little bit easier to get the mortgage loan you need.

If you ever think about if a reverse compounding mortgage is the best option for your retirement situation? The hone of the manyst answer is that I can’t tell you for sure but I can tell you that it is one of the many option you should investigate.http://floridahomeloanreport.com

I won’t lie to you buying a house is an expensive thing to do, there are fees to get a loan, there are closing costs, there is the time and money you spend when you are looking at houses. It sometimes seems that every single phone call is someone wanting some more money from you. It can be easy to discount the costs that are not required to get a loan, the home inspection usually falls into this section but forgoing it can be a mistake.

Your best protection against buying a home that is substandard in any way is to have it inspected by a qualified home inspector. It can be difficult as you have probably falled in love with the house and are imagining how your children will look playing in the garden. You don’t want to think that there could possibly be anything wrong with your future home, but isn’t it better to know sooner rather than later that the roof will need replacing in a year or two.

Buying a house is expensive, but the home inspection is not the thing to do without in the hope of saving a few hundred dollars. A new roof will cost you somewhere in the region of $15,000 so it is worth spending a few hundred to check that you won’t be needing a new one any time soon. No matter how nice the home owner appears it is not good enough to just trust that they will even know about any problems their house has never mind telling you about them.

Finding a home inspector that is certified is important, don’t be tempted to ask a friend who is a contractor to look over the place just so you can save a few dollars. Home inspectors are specially trained to be able to spot problems in your home that you (or your contractor buddy) would miss, most of us have no knowledge of electrical systems or plumbing beyond the turning on of lights and the flushing of the toilet.

In some states, it makes sense to also have inspections for radon, mold and termites. You also want to make sure that the roof is thoroughly inspected as is the basement. You can also ask the seller to purchase a one-year home warranty that will cover the major components in the house for one year and is renewable if the buyer chooses to do so. These are usually less than $450 and are worth their weight in gold.

Trying to work out what a reverse mortgage is exactly? There is no easy way to show you but if you are at or very near the age of retirement then it is worth looking into.

I often ask new clients what they think their home is worth. Not surprisingly, the answers I get back are usually overly-optimistic. Nonetheless, these clients often have a very strong sense of how much their home is worth to them. In fact, I find that people who come to me looking for reverse mortgages are particularly good at separating the intrinsic value of their home from its market value.

Despite the constant movements in real estate prices, the inherent value that a home has to a borrower is usually much higher than market value. Our homes are more than cinder blocks and wood. They often represent the very essence of our lifestyles and are the places that give us the most comfort. The value of these aspects of our home cannot be quantified in the open market. For many individuals, these inherent aspects of our homes represent the most important and meaningful parts of a home that can’t be value through an appraisal or sale of the home.

Nonetheless, the market price of a reverse mortgage borrower is largely secondary. These individuals usually are not planning to sell their home any time soon and the fair market value of their home is only relevant in as much as it determines how much they can borrow in a reverse mortgage. The real issue that these borrowers contend with is how to properly allocate their retirement assets. These borrowers understand that having a majority of their retirement assets tied up in one place may not be the most conservative and effective strategy for their retirement savings. These individuals usually are keenly aware that their home equity is most efficiently put to use when its considered a part of their overall retirement planning.

As the old saying goes, “You can’t take it with you”. However, that doesn’t mean you should squander it away either. Prudent borrowers incorporate their reverse mortgage proceeds into their overall retirement plan to maintain or increase their standard of living throughout the entirety of their retirement years. What you do with reverse mortgage proceeds is entirely up to you. However borrowers are best advised to plan carefully and think holistically.

Seniors who carefully consider their overall financial picture and include their home equity in their retirement planning are more likely to live comfortably during their later years. Seniors who ignore their home equity are missing one of the largest pieces of their retirement puzzle. Although these loans are not appropriate for everyone under every circumstance, if your home consists of a large part of your net worth, you should definitely think about reverse mortgages and how they may help your retirement planning.

If eliminating pesky monthly mortgage bills, freeing up additional cash and owning your home for the rest of your life fits into your retirement plans, then looking into a reverse mortgage may make sense for you. You would be wise to investigate this flexible financing vehicle closely. You may be shocked at what a reverse mortgage can do for you.

Looking for more information on a reverse mortgage calculator or calculators? Then make sure to check out Tim Begert’s online resources.

Let’s face it, there is good and bad in everything that we do. The real question is; does the good outweigh the bad? We are going to take a look at what the real story is. Are reverse mortgages good or bad? We will start with the “bad” points.

Reverse Mortgage Cons:

1. Mortgage Insurance – All FHA loans have mortgage insurance, regardless of how much equity you have available. In the case of a reverse mortgage, it is for the possibility the balance of your loan may exceed the amount your home is worth. This only applies when it is time to sell your home and is usually in the event that property values decline. Remember, even if you use up all your equity, you will never be kicked out of your home. Because of the Mortgage Insurance, you and your heirs will never owe more than your home is worth. That is what you are paying for.

2. Compound Interest – Everyone likes to earn it, no one likes to pay it. Simply defined, it is interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. If you’ve ever had a savings account or investment that you rolled the earnings back into, you have likely earned it. Since you are not making payments on your loan, compound interest will add up.

3. Spending Your Kids’ Inheritance – I have heard some say that it is wrong to spend the children’s inheritance. But, I have to ask, “Whose money is it”? In my opinion, if you need the money, use it. You can leave what is left over, and that should be enough. You shouldn’t blow the money, but use enough to make life comfortable.

The Pros of a Reverse Mortgage:

1. Maintain Your Independence – What could be more embarrassing than asking your kids for financial help to cover monthly expenses? Would you like to need to move in with your kids? You can use your home’s equity to make ends meet and keep your dignity.

2. The Ability to Keep Your Home – Not having to move potentially decades of collected items and memories might be the best reason to do a reverse mortgage. Just the thought of moving makes most people cringe. By taking advantage of a reverse mortgage, you can afford to keep the home you love while affording the retirement you deserve.

3. Making Life Affordable – So many impoverished seniors have become so accustomed to being broke that they don’t even know that they are. Reverse mortgages allow you to access your equity and use it as a lifetime income stream. You might feel like you’ve won the lottery if you were able to get a few hundred dollars more every month.

4. No Mortgage Payments – There are no monthly payments, and you don’t have to pay back the loan as long as you maintain the home as your primary residence. This can really be helpful when times are tough.

Did you notice that the fees weren’t mentioned in the “cons” section? That is because fees are no longer a reason to not do a loan. There are new programs available that cut the fees of a reverse mortgage 50% or more. Usually the origination fee can be totally waived and you could get a large credit towards your mortgage insurance.

Before we summarize, let me admit something. Yes, I am a reverse mortgage loan officer, but I truly believe reverse mortgages are a great tool that can help a lot of people. I am not saying they are for everyone, but when I see anyone saying they are bad, I just cringe. Tools aren’t bad. It’s how you use them. If the equity in your home is the only money you have, what is wrong with using it to make life livable?

Now it is up to you to decide. Is this a tool that can help you or someone you know? Will your life be enhanced with a reverse mortgage? If you are still unsure and want more information, read more of our articles on our website.

David Prulhiere is the owner of Redwood Financial Services and he specializes in reverse mortgages. If you would like to read more about reverse mortgage pros and cons? You can also see other articles and blogs with additional reverse mortgage information.

1. Getting a Reverse Loan for the Purpose of a Short Term Fix.

In instances where foreclosure is imminent, or repairs are needed to maintain habitability, for example, would be reasons to use a reverse mortgage short term. But as a general rule, you should consider a reverse mortgage as a long term solution. When you consider the fees that are associated with a reverse mortgage against the need for the money, you should be able to determine if it makes sense for you with the help of a trusted loan officer.

2. A Reverse Mortgage Can Affect Your Government Benefits.

Not really because of getting a Reverse Loan, but because of the impact it can have on your finances. The program we are specifically speaking of is Medicaid. If you have too much money in reserve, you can be disqualified. The way this can happen is by taking a lump sum of money that is needed for something like home repairs, but you put in your bank account first. If you don’t spend it when the new month rolls around, you could cost your Medicaid eligibility. Another way is if you take a monthly allotment and don’t spend it all each month. This will be a savings that long term could equal enough money in your bank account to disqualify you.

3. Doing Your Reverse Mortgage Through a New or Inexperienced Loan Officer.

It may be hard to believe, but bank loan officers don’t have to be licensed or trained to the States standards. On the other hand, mortgage brokers have very strict criteria set by the State to be allowed to do loans for the public. Virtually anyone can be a loan officer at a bank and experience is not necessarily a requirement. You could walk into a bank, apply for the job, and be taking applications in a very short period of time. It may be a bit biased, but I would prefer to deal with someone that is a trained professional, one that is licensed and can be held accountable to the State. Since the commission that a loan officer earns can be pretty high, it can tempt the younger, less experienced ones to overcharge in the hopes of making a big payday.

4. Avoiding a Reverse Mortgage Loan Because of Fear of the Unknown.

There are so many people afraid of a reverse mortgage for no other reason than they just don’t know who to trust. The facts seem too good to be true, so they shy away. What I would like to show is how to know what is true and how to make a smart decision. First off, there are too many “experts” in a field that they know nothing about. The amount of disinformation is almost overwhelming, even for someone who knows the truth. I have seen financial planners who will state that you lose your home when you do a reverse mortgage. I have heard several people say that you will leave excessive debt to your heirs. So here is a little advice that may soothe your concerns: First, try to find a loan officer that you feel you can trust. If you have an uncomfortable feeling about the loan officer, you should probably find someone else. You are not tied to the first person you talk to. Second, don’t listen to the advice of everyone out there. There is a great article (if I say so myself) called “Bad Advice From Good People about Reverse Mortgages”. Check it out if you want to see an article about how to qualify the person giving you the advice. The gist of it is; see if the person you’re seeking advice from actually knows anything. In the example above, the financial planner may be a genius about retirement money, but probably has never originated a loan. If you ask your kids for advice, which is strongly recommended, make sure they know what they are talking about. If they are not qualified to advise, have them attend your meeting with the loan officer. This also applies to you. I have seen people disqualify themselves because they don’t think they qualify. The best advice here is to ask a true professional in the field.

5. Moving Too Quickly During the Reverse Loan Loan Process.

It only takes about 10 minutes to teach you everything you need to know on a reverse Loan. But you will probably have questions that will make you more comfortable when you get the answers. Sometimes these questions take a little time to formulate, so don’t let your loan officer rush you into making a decision. Don’t mistake doing your loan quickly with pushing you to make up your mind in a hurry. Once you have determined you want a reverse mortgage, the process should be fairly quick. It will take about a month to a month and a half to get your loan closed.

6. Thinking That Being Older Will Get You More Money.

Bonus mistake: I know I said five, but this one came up while typing this. Waiting until you’re older is not always the best option. With rates being so low and terms being so good, it probably makes more sense to do the loan now rather than later. This is because adding another year or two to your age will get you a little more money. But, if the interest rates go up just a half of a percent, it could make thousands of dollars difference. The point is; Lower rates trump age, assuming all potential borrowers are at least 62 years old.

See more articles and blogs at Redwood Reverse Mortgage. David Prulhiere owns Redwood Financial Services and specializes in reverse mortgage education and loans.