Reverse Mortgage Saves 2 Homes from Foreclosure

Entire article here:  http://www1.pressdemocrat.com/article/20080504/NEWS/179367206/1036/BUSINESS01

 

The Santa Rose (CA) Press Democrat has a great story regarding how a reverse mortgage was used to save a home from foreclosure.

“Facing foreclosure on her Sebastopol home and Petaluma rentals,” Anna n-ha(cq) Millee used a reverse mortgage to pull cash out of the properties and pay off her lenders,” according to One borrower’s return from edge of foreclosure. The paper says the borrower was “able to tap $276,000 in equity based on her age and the value of the Sebastopol home. Now, she doesn’t have to pay the $1,500 mortgage on the Sebastopol home, leaving more money for daily needs.”

Notice that she not only saved her home from foreclosure, she also saved a rental unit with the reverse mortgage funding she was able to get.

The story continues:

“There also was enough money left to improve the income property. She plans to eventually put tenants back into the units and restore lost income that led to her financial dilemma.

“I was in total panic. Right now, this meets my needs completely,” she said.

“Reverse mortgages have gained popularity as retirees find turning equity into cash can meet different goals in their lives.

“Paying off home loans, pulling out cash for living and health care expenses, making home repairs top the list. For the 69-year-old n-ha Millee, it’s all of the above.”

You don’t like to see anyone forced to borrow for any reason. That said, at a time when lenders are lopping off withdrawals from home equity lines of credit (HELOCs) and closing the door to new financing, at least Ms. Millee had somewhere to turn and — no less important — she didn’t lose her home.

“She was able,” says the paper, “to tap $276,000 in equity based on her age and the value of the Sebastopol home. Now, she doesn’t have to pay the $1,500 mortgage on the Sebastopol home, leaving more money for daily needs.”

Reverse mortgages were never intended to save homes from foreclosure. That said, saving a home from foreclosure seems to be a small-but-growing use for reverse mortgages. For those who may face the loss of their homes, the idea of a reverse mortgage lifeline has great value — especially as alternative financial options disappear.

 

 

Why Should You Decide Now?

I just spoke with a woman who has been considering a Reverse Mortgage since last September.  During that time, she has wavered and her wavering has not worked in her favor.

She lost her job suddenly, has a disabled son and a daughter who has medical problems, and she could certainly use the money from her home.

But, her friends and family, well meaning, have told her NOT to get a Reverse Mortage.  They have read about the scams attached to Reverse Mortgages, and are also still operating under the myths that you can lose your home, or all your equity.

Sadly, she keeps cancelling appointments with me so I cannot show her facts and help her change her circumstances.  Recently, her daughter’s car was stolen and I wonder if she had adequate car insurance.

So what has it cost her to wait?  LOTS!  First, her home has declined in value since September by more than $23,000.00.  That means the money she can access from a Reverse Mortgage is reduced quite a bit. 

What else has it cost her?  The interest rates have CLIMBED while her EQUITY HAS DECLINED.  So not only can she get LESS money, it will COST HER MORE to do it.

If she’d only decided last September, she could have accessed more equity at a very favorable rate and just let that money sit in the credit line until she needed it.  Like when she lost her job.

I understand how fearful people are about their homes and their equity.  The media certainly isn’t helping with all their stories of gloom and doom.  But I’ve been in the mortgage industry for more than 30 years, I’ve seen the cycles, and I’ve also seen the fraud.

The pockets of fraud do NOT represent the majority the mortgage business.  But, like bad news, it gets more media attention than the positive stories that have been made possible through various mortgage programs.

So, if you or someone you love is “sitting on the fence,”  encourage them to make an appointment with a qualified mortgage representative (I am one), and GET THE FACTS.  Property values are still going down and rates are still fluctuating.

IT COSTS NOTHING TO GET THE FACTS — IT CAN COST QUITE A LOT TO SIT ON THE FENCE.

Email me at:  reversebymontana@aol.com — Or call, 561 860 3860

She’s Getting a Face Lift!

This morning I spoke with a wonderful woman who closed on her Reverse Mortgage last November.  Since then, she was able to quit her job (she’s 78 and was working 5 days a week), buy some new furniture, do some home improvements, adopt an abused puppy (now she’s home so she can have a pet), and exercise three times a week at a local spa.

She is SO HAPPY and to hear her voice compared to when we first spoke, you would not know she is the same person!

This morning she called to tell me she is going to get a face lift with a new procedure that takes only about an hour.  She’s seen the results and met with others who have done the same.  One of them has become a new friend and to quote Regina “Everytime I see her, she looks younger and younger!  Even the customers at the coffee shop where she works wondered what happened to the ‘old lady’ that used to work here!”

So Regina is going to use her increasing credit line from her Reverse Mortgage and pay for a face life IN CASH!

She still has almost a $100,000 left that she hasn’t touched, and her credit line is growing every month, so that by summer’s end, she will be able to use that money for her cosmetic procedure and not touch her main amount available.

It’s the little things sometimes that can make such a difference.  In Regina’s case, her entire life is changed and I feel blessed that I was able to help her out. 

The Reverse Mortgage seems to truly be “the gift that keeps on giving.”

Get the Facts

Have questions? Ask Montana 561 860 3860 or Email Me Here.

Many shy away from getting a reverse mortgage because of rumors or misinformation that they have heard. This is a great shame as this government backed financial tool can be the perfect solution for many seniors. Hopefully by dispelling some of the incorrect information you may have heard, you might consider a reverse mortgage as being something that could help improve your quality of life.

A reverse mortgage is available to any senior who is 62 of over, lives in a single family dwelling, or two-to-four unit buildings or even FHA-approved condominium. There must be no, or very little, mortgage left on the home. This type of loan is geared to unlock the equity in homes allowing seniors access to funds that they can spend virtually any way they like such as, supplementing pensions or social security, health care, paying for grandchildren’s college fees, vacations etc.

Many know of these benefits but are still afraid to apply to a reverse mortgage because of fears they have about loosing their home and that they are ineligible. Let’s clear up some of the most frequently misunderstood things about this type of loan.

After taking out the loan, the bank effectively owns my house

Not true. The title deeds always stay with the homeowner; the lender has no more right to your home than does anyone else. Even when the loan is due to be paid back (because it’s been sold, is no longer the principal residence or the borrower(s) have died) the lender still has no right to take possession of the property.

I won’t get a reverse mortgage because I have bad credit history

Bad credit history hardly ever stops anyone from being eligible: it is extremely rare for anyone to be denied a reverse mortgage because of a bad credit history. Only if you’ve defaulted on money owed to the government can it be a problem, but even then, it won’t necessarily make you ineligible. Remember, this type of loan doesn’t care about income or that you can ‘pay it back’, that’s because you make no repayments; instead the lender gives you money each month.

When I pay back the loan I have to sell my house

Absolutely not. The loan must be paid back when the house in no longer the principal residence, you sell it or you die and it must be paid back as one lump sum. But, it doesn’t matter where the money comes from. You or your heirs can sell the home, or your heirs can obtain a regular mortgage on it to repay the original loan back, or sell shares, or from wherever else the money can be found.

I can’t will my property to my heirs

Why not? As you still have the title deeds you can leave the house to whoever you like. True, the reverse mortgage will also be passed on to them, but they have the option of repaying it back anyway they choose.

My family will feel as though I’ve taken away their inheritance

As stated above the house can be willed to them. Would you rather they lost their inheritance because you had to sell your home to pay for your medical costs or home help as you get older? With a reverse mortgage, you keep the house and pass it on to your heirs. After your death, they don’t have to sell it to pay back the loan instead they can obtain a regular mortgage to finance paying back the reverse mortgage.

http://www.americanchronicle.com/articles/50379 — article

Fixed or Adjustable?

Recently I took a loan application for a client who decided she wanted a fixed rate Reverse Mortgage and she was non-negotiable.

I knew a fixed rate was not a good choice for her, so I printed out amortization schedules for both a HECM adjustable and the fixed rate. And I showed her why a fixed rate was a really poor choice in her case.

Why? Well, simple. The provisions of a fixed rate require that the borrower take out ALL the funds at closing. That means that from day one, they are paying interest on the entire loan amount, vs. paying interest only on financed closing costs and any draws on a HECM adjustable.

Here’s the facts:

If she were to take an adjustable with the loan amount she was eligible for (171,720), she would still have equity in her home 32 years later.

However, if she chose a fixed rate, because of the requirement to draw the entire amount at closing, she would be out of equity in 15 years!

And since she was in her early seventies, that would mean that by her mid-eighties, she would have no equity left.

And those figures are based on the assumption of an annual appreciation rate of 4.7% which in this market is not supportable. It may be historically, but it isn’t right now.

So when considering your options compare Apples and Apples – and look at the progression of your loan over time on the adjustable vs. the fixed!

For more information, contact Montana at 561 860 3860.

Calculator Considerations

http://www.americanchronicle.com/articles/50006 Article Here

Below is an article on the information provided by the reverse mortgage calculator. The challenge I have is that these calculators are programmed with certain assumptions that can vary depending on many factors:

Who provided the calculator? Different lenders and agencies use different algorithms and information can vary

Your age and your spouse’s age — programmed into these calculators are your expected ages based on actuarial tables, however, people are living much longer with each new medical discovery and increased uses of holistic options.

The good news is that the older you are, the more money you can access. So if the calculators are being very conservative in your life span projections, you will get less money at closing BUT since your credit line grows every year, you will have the ability to tap into your equity again and again.

What the calcuators cannot guestimate is your home value down the road. Here’s the good news. If you get your loan today, and your home value does decline, you’ll have accessed MORE of your equity than you might have 6 months or a year down the road. And remember, since your HUD insurance guarantees you cannot ever owe more than the value of your home, you ARE protected regardless of what happens to your home value.

So what’s the bottom line? It is this: regardless of what the calculator computes for amount of money you may receive, regardless of market conditions down the road, if you have an adjustable HECM, your credit line grows annually AND again, you can never owe more than the value of your home.

Important Consideration: If you choose a non-FHA loan, calculations and loan guarantees and protections are very different. So are loan requirements — in some cases you are required to take the entire amount of the loan at closing with these loans. That means you are PAYING INTEREST on the entire amount from day one and that also means your equity will be reduced much more quickly.
Information below from this article

While a free reverse mortgage calculator might be able to give you an idea of how much you could borrow, none will be able to tell you something that is far more important, and that is how much equity will be left in your home after a period of years. It’s crucial you are aware of this before you make any decision on whether to opt for this type of loan.

There are a number of calculators to be found online. However, you may find that the amounts illustrated differ from one website to another, even when the same dates and amounts are entered. If you are going to opt for either a Fannie Mae or FHA reverse mortgage, then the best (and free) reverse mortgage calculator can be found at either the AARP or National Reverse Mortgage Lenders Association (NRMLA) websites. Both are accurate, display identical figures and display most of the crucial information, such as how much you’d receive as a fixed monthly payment, a line of credit (and how much that line of credit would appreciate over 5 and 10 years for the FHA program) or how much you’d receive as a one-off lump sum.

But, if you opt for a jumbo program, you’ll need to use that company’s proprietary calculator. These calculators also give you the FHA and Fannie amounts though they tend to be slightly less accurate. The Financial Freedom calculator is the most widespread.

A reverse mortgage calculator works by using the equity value of your home, its location, your age (and partners), and current interest rates. It then performs the calculation and gives you an indicative illustration of what you’d receive.

What it won’t tell you is how much equity would be left in your home after a number of years. This is important. How this type of loan works is that the lender agrees to pay you a fixed amount over a period of time – usually as monthly payments. When you no longer live in your home, sell it or die, the loan – in its entirety – must be paid back. This is usually done by selling the home. Any money left after the loan is paid you get to keep.

However, the amount you will receive depends on two things; house prices (how much you could sell your home for in future years) and interest rates.

If house prices fall, you or you heirs would receive less money from the sale of your home or even none at all. Likewise a rise in interest rates would also be detrimental.

No calculator illustrates these two, what-if scenarios. Therefore, when using one, be aware that it will show you what you’ll receive but not the amount of loan that will have to be paid back in say 5, 10 or 15 years from now.

This is why you should speak to your local originator (broker) as soon as possible. Don’t be blinkered by what you get now, but think about what you’ll be left with in years to come. And, don’t say it doesn’t matter because you intend to stay put in your home until you die and you don’t care about your heirs; circumstances change. You must put some thought into this aspect of your reverse mortgage right from the start. It’ll be too late after you take it out and are receiving money.

http://www.americanchronicle.com/articles/50006 Article Here

Misconceptions

Information below from this article.

Many shy away from getting a reverse mortgage because of rumors or misinformation that they have heard. This is a great shame as this government backed financial tool can be the perfect solution for many seniors. Hopefully by dispelling some of the incorrect information you may have heard, you might consider a reverse mortgage as being something that could help improve your quality of life.

A reverse mortgage is available to any senior who is 62 of over, lives in a single family dwelling, or two-to-four unit buildings or even FHA-approved condominium. There must be no, or very little, mortgage left on the home. This type of loan is geared to unlock the equity in homes allowing seniors access to funds that they can spend virtually any way they like such as, supplementing pensions or social security, health care, paying for grandchildren’s college fees, vacations etc.

Many know of these benefits but are still afraid to apply to a reverse mortgage because of fears they have about loosing their home and that they are ineligible. Let’s clear up some of the most frequently misunderstood things about this type of loan.

After taking out the loan, the bank effectively owns my house

Not true. The title deeds always stay with the homeowner; the lender has no more right to your home than does anyone else. Even when the loan is due to be paid back (because it’s been sold, is no longer the principal residence or the borrower(s) have died) the lender still has no right to take possession of the property.

I won’t get a reverse mortgage because I have bad credit history

Bad credit history hardly ever stops anyone from being eligible: it is extremely rare for anyone to be denied a reverse mortgage because of a bad credit history. Only if you’ve defaulted on money owed to the government can it be a problem, but even then, it won’t necessarily make you ineligible. Remember, this type of loan doesn’t care about income or that you can ‘pay it back’, that’s because you make no repayments; instead the lender gives you money each month.

When I pay back the loan I have to sell my house

Absolutely not. The loan must be paid back when the house in no longer the principal residence, you sell it or you die and it must be paid back as one lump sum. But, it doesn’t matter where the money comes from. You or your heirs can sell the home, or your heirs can obtain a regular mortgage on it to repay the original loan back, or sell shares, or from wherever else the money can be found.

I can’t will my property to my heirs

Why not? As you still have the title deeds you can leave the house to whoever you like. True, the reverse mortgage will also be passed on to them, but they have the option of repaying it back anyway they choose.

My family will feel as though I’ve taken away their inheritance

As stated above the house can be willed to them. Would you rather they lost their inheritance because you had to sell your home to pay for your medical costs or home help as you get older? With a reverse mortgage, you keep the house and pass it on to your heirs. After your death, they don’t have to sell it to pay back the loan instead they can obtain a regular mortgage to finance paying back the reverse mortgage.

Information above from this article.

Did You Check the Fine Print?

News reviews about Reverse Mortgages are increasing daily. When you are reading these articles, consider the author (a columnist or a mortgage banker?), and again, research, research, research.

This article addressess the fine print of a Reverse Mortgage, and takes information from some very credible people: a mortgage banker, a director of Housing Options Provided for the Elderly, and an AARP representative. 

It also includes an 800 # to search for an approved counselor.

Interesting Fact: The number of reverse mortgages has skyrocketed in recent years, to 107,000 in 2007 from 37,000 in 2004.

Additional important fact: During that time, housing prices nationwide have fallen in many areas. What that means to you is less money from your Reverse Mortgage. If you really think this program is for you, decide now.

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