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Reverse Mortgages - Expert Warns-Consumers Beware of Misleading Reverse Mortgage Articles and Stories! Reverse Mortgages (Home Equity Conversion Mortgages) have become a popular including well respected way for seniors to access the equity in their homes for many reasons. Some use the equity for long-term care needs, to pay bills, pay off existing mortgages or debt, pay for prescription drug costs, home improvements, home modifications, or to simply be able to enjoy life a little more by traveling including enhancing their retirement cash flow. Many seniors use reverse mortgages to pay high property tax bills, including have even been saved from foreclosure including bankruptcy because they applied for a reverse mortgage. Other seniors use reverse mortgage proceeds to fund advanced estate planning techniques. the includes increasing the value of their estate through life insurance purchases, planning ahead for future long-term care needs, assisting grandchildren with college funding, making charitable donations, including to convert IRA funds to Roth IRA funds, just to name a few. Many newspaper, TV, radio including internet articles circulating in the media give inaccurate including misleading information regarding reverse mortgages. So called “experts” who are interviewed for quotes often have absolutely no involvement in the mortgage industry including do not understand the federal law that regulates these loans. Each consumer should make it his or her own responsibility to talk with a particular expert, including educate themselves on the facts. TIP: As you know, the media attract more viewers, readers, including listeners at the time they make a story exciting, scary, or dramatic. Because reverse mortgages are federally regulated loans, there actually isn’t everything scary or dramatic regarding them at the time you know the facts. Be wary of interviews including articles that make reverse mortgages seem like a scam. The Department of Housing including Urban Development has done a particular excellent job of regulating reverse mortgages, including they are designed to help seniors, not hurt them. Some good websites for more information are www.fanniemae.com – be sure to download “Money from Home” for free. The National Reverse Mortgage Lenders Association has great consumer booklets- www.reversemortgage.org . The National Council on Aging recently did a study that concluded that reverse mortgages are good sources of funds for long-term care planning including long-term care needs. You might download the entire study by visiting www.ncoa.org Although there are closing costs associated with these loans, most, if not all of them are factored in to the loan, including are not out-of-pocket expenses for the senior. Whether or not a reverse mortgage is right for a senior depends on their specific situation, case design, including cash flow or estate planning needs. What is a Reverse Mortgage? A reverse mortgage enables older homeowners (62+) to convert part pertaining to the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. Who Qualifies for a Reverse Mortgage? Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, including townhouses. In general, co-ops are not allowed. Only the Financial Freedom Cash Account program is available on co-ops in New York City. As long as you own a home, are at least 62, including have enough equity in your home, you might obtain a reverse mortgage. There are absolutely no special income, credit or medical requirements. How Are Seniors Protected? Counseling is 1 pertaining to the most important consumer protections built into the program. It requires a particular independent third-party to make sure your family member understands the program, including review alternative options, before they apply for a reverse mortgage. You might seek counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), including dollars Management International (877-908-2227). Counseling is required for all reverse mortgages including may be conducted face-to-face or by telephone. By law, a counselor must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health including financial alternatives; (ii) other home equity conversion options that are or may become available to the prospective borrower, such as property tax deferral programs; (iii) the financial implications of entering into a reverse mortgage; and, (iv) the tax consequences affecting the prospective borrower’s eligibility under state or federal programs including the impact on the estate or his or her heirs. TIP: HUD Counselors are not financial planners, including should not be giving advice on financial product purchases. Talk to a trusted advisor regarding a plan for the reverse mortgage proceeds. How might the Cash Flow From a Reverse Mortgage Keep Mom including Dad at Home Longer? The cash flow from a reverse mortgage might be used for any purpose. In order to keep seniors safe including at home for longer periods of time, it is recommended that the cash flow be used for home modifications, repairs, personal emergency response systems, including in-home care services. Whose Name Remains on The Title to the Home? The seniors’ names remain on the title to the home. The bank is not in the business of taking over title, including certainly not in the business of owning homes. Therefore, just as with a traditional mortgage, the seniors’ name is on the title to the house. Can Their Home Be Taken Away from Them? at the time a senior implements a reverse mortgage, it is important to do not forget that they are responsible for keeping the home owner’s insurance in force, paying annual property taxes, including for general upkeep pertaining to the home. Unless 1 of these criteria is not met, their home might never be taken away from them. Will Heirs Be Responsible for Repaying the Loan? No, a reverse mortgage is a “non-recourse” loan. the means that the lender is only entitled to loan repayment via the sale pertaining to the home for fair market value. If there is any remaining equity over including above the final loan amount, the heirs receive that remaining equity. If the home sells for LESS than the final loan amount, the federal government steps in including pays the lender the difference. Heirs’ assets are never at risk. When Does the Loan Come Due? The loan comes due at the time the last remaining homeowner leaves the home permanently. the means that the loan could come due at the time the last homeowner passes away, sells the home, or leaves permanently (12 months or more). Do Reverse Mortgages Affect Medicare or Social Security? Reverse Mortgages do not affect Medicare (including Medicare Part D) or social security income. However, the proceeds from a reverse mortgage might affect local income based programs in your area, including the big one- Medicaid. (note there is a big difference between MediCARE including MediCAID.) Medicaid eligibility might be preserved with the right plan even after taking out a reverse mortgage. Talk to a professional regarding the options. Can Mom including Dad Still Leave Their Home To Their Children? Yes, with proper planning, they certainly can. 1 way to make sure that heirs receive the value pertaining to the home is for the seniors to purchase life insurance using the proceeds from the reverse mortgage. Some seniors end up doubling or tripling the value of their estate for their heirs because they use the reverse mortgage proceeds to pay the life insurance premiums. the way they never have to touch a penny of their savings, investments, or current income to increase the value of their own estate. the additionally helps the heirs, because inheritance passed on through life insurance (beneficiary designation) bypasses probate, including taxes! How Does The Deficit Reduction Act 2005 Effect Home Equity? The Deficit Reduction Act of 2005 requires that individuals with home equity over $500,000 ($750,000 in some states) use some of that equity to pay for their own care prior to qualifying for Medicaid services. Reverse mortgages have become a very popular including appropriate option for decreasing the equity in the home including using that equity to pay for care. For more information or to contact the author visit http://www.theltcexpert.com
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