Things
to Know if You're Interested in a Reverse Mortgage
What is a Reverse
Mortgage?
You probably have heard the term “Reverse Mortgage” before;
maybe someone has suggested one to you. What are Reverse Mortgages? If you are
62 years of age or older, they are a way to borrow against the equity in your
home (the value of your home minus any mortgage debt you now have) to provide
you with tax-free income. You continue to own, and live in, the home for the life
of the loan. There are no loan payments until the loan ends. The money you receive
can be in the form of:
- A lump sum of cash.
- Regular monthly
payments for your life or for as long as you live in the home.
- Regular
monthly payments for a fixed length of time.
- A line of credit to draw
on when you need it.
- A combination of options 2 & 4 or options 3 &
4 above.
Carefully read all you can and talk with FHA recommended
counselors before you decide to pursue a Reverse Mortgage. You need to make a
wise decision about the most valuable asset you may own — your home.
FHA
funds housing counseling agencies throughout the country who can give you advice
on reverse mortgages. To find a counselor near you, visit the FHA
Housing Counseling Agency Listings, or call: 800-569-4287. You can also contact
the HECM
counselors from FHA's National HECM Counseling Network. They can provide face-to-face
and telephone counseling nationwide.
When is a Reverse Mortgage right
for you?
A Reverse Mortgage might be worth considering if:
- You
are committed to staying in your home, either because you don't want to leave
or because other housing alternatives are unappealing or unaffordable.
- You
want to enhance your lifestyle and enjoy your golden years.
- You want a
cushion for major expenses such as medical bills for a serious or long-term condition,
or for major home repairs.
- You have a regular need for additional income
to live on and your only significant asset is your home.
- You want the
peace-of-mind that comes from knowing your financial needs are taken care of.
- You
own your home free of debt or you have a small first mortgage.
- You don't
plan to leave your home to your heirs through inheritance.
What
are some of the potential advantages of Reverse Mortgages?
- A Reverse
Mortgage can help you maintain your financial independence or improve your quality
of life.
- It allows you to remain in your home and keep title to your property.
- The
money you receive is tax-free. It is not usually considered income.
- You
make no payments (principal or interest) until the loan ends or the house is sold.
- Your
income is not a consideration in obtaining the loan since there are no payments
until the loan ends.
- You cannot owe more than the value of the house at
the end of the loan.
What are some of the potential drawbacks of
Reverse Mortgages?
- There are some bad people pushing reverse mortgages
on innocent seniors. Only consider FHA approved lenders. And, even then have someone
else, that you trust, look over the documents before you sign anything.
- Reverse
Mortgages are more complicated than conventional mortgages and the consequences
of various options are not always obvious up front.
- They arerelatively
expensive compared to other alternatives.
- Although the money you receive
is tax-free, it may affect your eligibility for “need based” public assistance
benefits such as Medicare, Supplemental Social Security Income (SSI) and Medicaid.
- Reduces
the equity you have in the property which could could cause a potential negative
impact for your heirs.
- If you get sick and have to move to assisted living
or independent living your home will have to be sold or your loan paid immediately.
- Reverse
Mortgages are often not well understood, even by real estate and legal professionals.
In general, what types of Reverse Mortgages are available?
- FHA-insured mortgages — Home Equity Conversion Mortgage (HECM).
- Lender-insured.
- Uninsured.
Each type differs in the amount you can borrow,
how the proceeds will be paid, and allowed expenses such as interest, closing
costs and other fees.
- How much money do I need?
- Is there a
way to meet my needs that does not involve getting a Reverse Mortgage?
- Will
a Reverse Mortgage make my partner or me ineligible for any government benefits
— now or in the future?
- Do I qualify for this Reverse Mortgage?
- How
much can I borrow through a particular Reverse Mortgage product?
- How much
will it cost me in fees and interest to borrow this money, even if I don't have
any “out-of-pocket” expenses?
- Will I have to sell my house before I die
to pay off this Reverse Mortgage?
- If I die, and my partner is still living
in the home, will he or she have to leave or pay off the loan?
- Will the
loan become due and payable if I go to a long-term care or nursing home?
- What
will my heirs or I have left after the loan is paid off?
- Are there any
early-repayment penalties?
- What are my obligations under the Reverse Mortgage,
such as property maintenance, property taxes and insurance?
Six
important things to do before you make a decision.
- Decide how
long you expect to stay in this home. Reverse Mortgages are relatively expensive
for the first 2-3 years. If a Reverse Mortgage doesn't work as a long-term solution,
you should consider other options.
- Consult with a HUD-approved Reverse
Mortgage counselor before you apply. This information service is usually offered
free of charge. A counselor can help you decide whether a Reverse Mortgage or
some alternative best meets your needs. They can help you choose between the different
kinds of Reverse Mortgages and answer your “what if” questions. To find a counselor
near you, visit the FHA
Housing Counseling Agency Listings, or call: 800-569-4287. You can also contact
the HECM
counselors from FHA's National HECM Counseling Network. They can provide face-to-face
and telephone counseling nationwide.
- Decide if you really need a Reverse
Mortgage. Another type of loan may be a less costly solution to meet your financial
needs. A counselor can show you alternatives.
- Include your family, especially
grown children, in the decision-making process. Try to get consensus among your
heirs before going ahead. If inheritance is an issue, adult children should be
willing to help.
- Shop around and compare offerings! Not all Reverse Mortgages
are the same. They can vary substantially in how much money you get — immediately
and in the long-term, how the money is paid out, how much you pay in interest
and other charges, and in other features.
- Determine if your Reverse Mortgage
affects your eligibility for “need based” public assistance benefits you may receive.
What
is “reverse” about a Reverse Mortgage?
You are probably familiar with
conventional mortgages. With these, you borrow money and make payments to build
equity in a home. You pay off the debt by making regular payments from your income
until the loan principal and interest are paid. As you make payments, your equity
(the home's value minus any mortgage debt) increases and your debt (loan balance)
shrinks. If you fail to make regular payments, you could lose your home. With
a Reverse Mortgage, you borrow against the equity you have built in your home
to produce income, or a line of credit. The debt is paid off at the end of the
loan by selling the home, or using other assets to pay off the loan. You cannot
lose the house during the life of the Reverse Mortgage loan for not making payments,
because you don't have any payments to make. Meanwhile, the debt (loan balance
including interest and fees) increases and your equity shrinks.
Won't
that leave me in debt when I die?
Not in debt to the mortgage lender
beyond the value of your home. The Reverse Mortgage lender can never require more
repayment than the value of your home when it sells. This is called a non-recourse
loan. When you or your surviving co-borrower dies, the sale of the house settles
the loan. The lender does not have recourse to your other assets or to your heirs.
If the loan ends for some other reason (such as if you move to an assisted living
facility), the house will have to be sold or the loan paid off some other way.
If you plan to leave your home to your children to inherit, think twice before
you take out a Reverse Mortgage.
Isn't it risky to put myself into debt
when I live on a fixed income?
There are certainly things to look out
for; we will discuss these in the fourth section of this booklet. But in general
the answer is “not usually.” Think of it this way: when you bought your home,
you depended on money you didn't yet have to pay off the loan (your income). With
a Reverse Mortgage, the loan is paid by money you already have (the value of your
home). The lender cannot require more than that. You could think of it as a loan
that has already been paid.
How much money can I get?
The best
short answer to that question is: “It depends.”
In general, the amount you can receive depends on five things:
- The mortgage program and program options you select.
- The age of the
youngest borrower when you take out the loan.
- The appraised value of your
home.
- Current interest rates.
- The amount of equity in your home.
HUD
estimates that a 65-year old can borrow up to 26% of a home's value, a 75-year
old, 39%, and an 85-year old, 56%. Any amount you owe on your home will need to
be deducted from these estimated amounts. It is important to remember that the
amount you could get each month, and the total amount you could get over the life
of the loan, depends on the program and options you select. No single program
works best for everyone.
How can I use the money from a Reverse Mortgage?
There
are no restrictions on how you use the money from a Reverse Mortgage. Some borrowers
use the proceeds of the loan to repair or remodel the home. Others use the money
to improve their lifestyle — free themselves from financial worries, take more
trips or keep the money in reserve (a line of credit) to handle future unplanned
expenses. Still others receive regular payments to help pay their monthly bills
or medical expenses. It's up to you.
Do I qualify for a Reverse Mortgage?
Different
programs have different requirements, but most programs:
- require the
youngest borrower to be at least 62 years old at the time the loan closes;
- will
loan on owner-occupied single-family homes (some programs will also loan on 2-4
unit owner-occupied dwellings, federally approved condominiums, planned unit developments
or manufactured homes on foundations);
- will not loan on mobile homes or
cooperative apartments;
- require that your home is your “principal residence,”
meaning you must live there more than half of each year;
- require that
your home meets minimum FHA property standards;
- require that you pay off
any existing mortgage or other liens against your home before getting the Reverse
Mortgage, or use an immediate cash advance from the Reverse Mortgage to pay them
off. (If you cannot pay off the existing mortgage or don't qualify for a large
enough cash advance, you will not be able to get a Reverse Mortgage.)
While
income and general credit history are not considerations for obtaining a Reverse
Mortgage, if borrowers are a year or more delinquent in their property tax or
insurance payments, an amount equal to three years of taxes and insurance may
be set aside in the loan to pay them in the future.
What if one of the
homeowners is under 62 years of age?
In this case, the only option for
the younger homeowner is to make out a quitclaim deed, releasing their interest
in the home to the borrower. The drawback is that when the borrower dies or leaves
the home, the loan becomes due, and the home may have to be sold to pay it. If
both borrowers are over 62 and own the home as joint tenants or in a family trust
and one dies or leaves, the loan continues and the remaining borrower can continue
to live in the home. For tenants-in-common there is no right of survivorship so
when either party dies, the loan ends and must be paid.
How much will
a Reverse Mortgage cost me?
Again, the short answer is: “It depends.”
Because costs vary so much between lenders, and are so difficult to compare, a
standard of comparison has been developed called Total Annual Loan Cost (TALC).
In general, costs come under three categories:
- When you apply for
the loan, lenders charge an application fee, which pays for an appraisal to determine
how much your home is worth and a check to see if you are delinquent on any federally
insured loans. This out-of-pocket fee may not be refunded if you later change
your mind about taking out the loan.
- At the loan closing (signing), a
number of fees take effect. Most of them can be financed. They become part of
the loan, and would also accrue interest. Many of these fees are similar to those
for conventional mortgages; others are unique to Reverse Mortgages. The two fees
that generally vary the most between lenders are the origination fee and the ongoing
fees for servicing the loan. You should check these fees specifically when comparing
loans.
- When the loan ends, there may also be shared equity or shared appreciation
fees. These could entitle the lender to a percentage of the remaining value of
the home. When comparing loans, check to see if there are any additional fees
when the loan ends.
What is expected of me as a homeowner during
the life of the Reverse Mortgage?
The general requirements are:
- That you pay your property taxes on time.
- That you keep your homeowner
insurance current.
- That you maintain your home in good repair.
What
about interest rates?
All current programs use adjustable interest rates,
either computed annually or monthly, depending on the program. Most borrowers
choose monthly rates; sometimes there is not a choice. Rates are usually a bit
higher than for conventional mortgages, some are much higher. Shop around before
deciding on a program.
When will the loan end and how much will I owe
at the end of the loan?
Typically the loan ends when the last surviving
co-borrower dies, moves away or doesn't live in the home. If the loan is for a
fixed amount of time (term), it becomes due when that time runs out. It is also
possible the loan could end if you fail to meet the homeowner requirements mentioned
above, though most lenders will work with you to meet those requirements.
The
amount you owe at the end of the loan (your loan balance) consists of:
- All the money you borrowed, including any you used to pay loan-closing costs.
- All
the accrued interest on that money and any financed fees — up to the loan's non-recourse
limit, the fair market value of your home.
How do I pay off the
loan?
In most cases, the loan is paid when the last surviving borrower
dies or moves away. Some people choose to pay off the loan early. There are three
ways of paying off the loan:
- You or your heirs can sell the house.
Either the sale will cover the loan or it will net more than the loan. Any proceeds
of the sale beyond what is required to pay off the mortgage belong to you or your
heirs. The lender can never get more than the fair market sale price of the home.
Your other assets and your heirs are safe.
- Other assets you or your heirs
have could be used to pay off the loan (for example: life insurance or stock).
The lender gets the money and you or your heirs keep the house.
- If there
is enough equity left, you or your heirs can refinance the home (probably with
a conventional mortgage) and pay off the loan that way.
How does
a Reverse Mortgage affect government benefits?
Social Security and Medicare
benefits are not affected, since they are not based on income or assets. Supplemental
Social Security Income (SSI) and Medicaidl do have income constraints. Loan advances
generally do not affect your benefits if you spend them during the month in which
you get them. If you don't spend them in that calendar month (keep them in a savings
or checking account, for example), they count as “liquid assets” and could affect
your eligibility. An annuity purchased with a Reverse Mortgage could also make
you ineligible. Check with the local SSI or Medicaid office, a senior-citizen’s
attorney or a reverse mortgage counselor, to clear up any specific questions you
may have.
What about income taxes?
Generally, the IRS does
not consider loan payments made to you as income, so they are not taxed. The interest
the lender charges you on the loan can only be deducted in the year the loan interest
is paid, at the end of the loan. Annuities may count as taxable income. Talk with
a tax professional for specific advice.
What steps should I take to determine
if a Reverse Mortgage is right for me?
- The first step is to find
out how much money is coming in and how much is going out to get an accurate idea
of your financial needs. This will become very important as you examine Reverse
Mortgage programs and their options and alternatives. The approach suggested here
follows an outline provided by the Federal National Mortgage Association (also
known as Fannie Mae). A complete outline may be obtained from Fannie Mae.
- Locate and assemble all of the records that show your sources of income and
expenses for the past year.
- List your sources of spendable income. List
all the funds available to you as spendable income, but do not include interest
or other earnings that were immediately reinvested.
- List all your expenses.
These could include: mortgage payments, other debts, utilities, food, income taxes,
property taxes, insurance, transportation, medical and dental not covered by insurance,
clothing, recreation, gifts, holidays, vacations, etc.
- Analyze your cash
flow. If you are like most homeowners, you will probably see ways to make more
efficient use of your assets. One way might be to use the equity in your home
to generate additional income.
- Make a budget for the
next 12 months. Estimate all the income and expenses you expect over the next
year.
- Using your cash flow statement, list regular monthly
income and non-monthly income you expect each month for the next year — the amounts
and the sources. Add the monthly and non-monthly amounts together to get an annual
total.
- Do the same thing for expenses for the next year.
- Compare
annual income and expense totals. If your total expected expenses are more than
your total expected income, this indicates the amount of additional funding required
to meet your needs.
- Now that you have the numbers, list your financial
goals in their order of importance. Start by thinking about your needs and wants,
now and for the future. This gives you a good starting place, even though they
may change. Now list the estimated cost to meet each of these goals. To calculate
your funding needs as a “lump sum,” multiply the annual total by the number of
years you plan to remain in your home.
- The next step
is to locate a Reverse Mortgage counselor. To be better informed before you contact
the counselor, or to locate one, you may wish to use the Internet from home or
at the local library or senior center. For the most up-to-date and detailed information,
get acquainted with the National Center for Home Equity Conversion (NCHEC) website,
www.reverse.org. It contains
a wealth of helpful information and pointers to other useful sites. Your library
may also have books that will help you learn more about Reverse Mortgages.
Both the U.S. Department of Housing and Urban Development (HUD) and NCHEC
websites provide lists, by state, of public or nonprofit organizations that do
Reverse Mortgage counseling. A toll-free number 800-569-4287 can also be used
to locate HUD-approved counselors. NCHEC “Preferred Counselors” work for nonprofit
or public agencies, not lenders. They have detailed local information about lenders,
program options and costs, and alternatives to consider.
Why meet with
the counselor before you contact a lender? There are several good reasons.
- A counselor can help you consider all your options, some
of which may not involve getting a Reverse Mortgage.
- A counselor can point
you to all the Reverse Mortgage lenders in your area. (You may be surprised how
few there are.)
- They can give you a “Personal Reverse Mortgage Analysis”
and a comparison, in writing, of all the Reverse Mortgage programs available in
your area.
- A counselor can point you to other sources of advice you may
need.
- There is no pressure from a counselor to apply for a Reverse Mortgage.
- At
the end of the counseling session, the counselor will provide you with a HUD Certificate
of HECM Counseling, which you will need if you apply for a Reverse Mortgage loan.
If
you cannot locate a counselor within driving distance (most of them are located
in urban areas), you can consult with one by phone. Not all Reverse Mortgage programs
require counseling before applying for a loan but it's in your best interest to
get it anyway.
However you do it, get this important information before
you discuss specific programs with a lender and before you apply for a loan. Because
of cost constraints, some independent counseling agencies have a nominal charge
for their services (usually around $75). What you learn can save you much more
than that. One more note: not all counselors are equally knowledgeable.
It's okay to ask how long they have been doing this type of counseling and how
many clients they have worked with.
- Your next step is to locate
a lender. Your counselor will have names and contact information for lenders in
your area. Applying for a Reverse Mortgage is similar to applying for a conventional
mortgage. The process is somewhat more complicated because program options have
to be selected and an annuity may be included. There are the usual inspection,
appraisal, title insurance and broker fees. Typically, there are more fees than
with a conventional mortgage. The lender is required by law to disclose the total
cost of the loan. However, you may find this information difficult to understand.
A counselor or senior attorney can help you make sense of it. If you are confused
at any time, always ask to have it explained. After the lender processes the loan,
there is a closing (signing) of the loan. Don't be surprised at the number of
pages you will have to sign or initial. Read everything before you sign and always
be sure you understand what you are signing.
By law, you have three business
days after signing to change your mind and cancel the loan. After three days,
you have access to the money under the payment option you chose. If there is an
existing mortgage, it will be paid off at this time.
What
are the most common Reverse Mortgage programs and options?
This is a
relatively new and rapidly growing market, programs change and new ones appear
over time, so we will describe representative examples of currently available
programs without trying to include them all. All the programs discussed use adjustable
mortgage interest rates (ARM). However, the rates and the way they are calculated
vary considerably from program to program. If you choose the line of credit option
with any of these programs, there is a monthly service fee. Your counselor will
have specific information about programs and options in your area.
By far,
the most used program is HUD's Home Equity Conversion Mortgage (HECM). Most Reverse
Mortgage lenders offer it. This federally insured program might give you more
cash than other programs if your home is worth less than, or about as much as,
the average home in your county. Here are some of the characteristics of the HECM
program:
- This is the only federally insured program. This insures
the lender in case the loan amount is more than the value of the home, and it
ensures that your payments will continue no matter what happens to the lender.
The premium is two percent of the loan amount plus one-half of one percent of
the outstanding loan balance annually.
- Independent counseling (and a counseling
certificate) is required to obtain this loan.
- All the payment options
and combinations are available with this program except lump-sum payment.
- You
can take out a lump sum from the line of credit option. You can change your payment
option during the life of the loan — for example, from a line of credit to monthly
payments.
- This program often has the lowest interest rates over the life
of the loan. It allows you to repay part of the principal and then borrow it again
without restarting the loan and without a penalty.
- A unique feature is
that if you choose a line of credit, the amount of credit available to you grows
larger each month the loan is in effect. This means the total amount you can borrow
can become much larger over time.
- One possible drawback of this program
is that the appraised value of your home is not the only factor in determining
how much you can borrow. The maximum loan amount is also limited by the “203-b-2”
limit for your area. Click
here to find this maximum loan amount. This is a fixed maximum home value,
defined by HUD, which varies depending on the area where you live. In areas where
housing is rapidly appreciating, you may find this limit much lower than the appraised
value of your home.
Fannie Mae's program is called Home Keeper. It
may be appropriate if your home is worth slightly more than the average home in
the county. Some characteristics of this program are:
- The amount you
can get from Home Keeper is sometimes higher than from HECM because Fannie Mae's
maximum loan limit is higher than HUD's.
- Independent counseling is required
to obtain this loan.
- The only payment option is monthly payments for as
long as you live in the home (tenure), line of credit or a combination of the
two.
- If you choose the line of credit option, the maximum amount available
does not grow.
- A variation is called Home Keeper for Home Purchase that
can help you “downsize” to a new home without making monthly mortgage payments.
Financial
Freedom, a private lender, has two programs. Borrowers with expensive homes, worth
much more than the HUD limit, may consider using them.
- Equity Guard
is a Reverse Mortgage Annuity program.
- You either receive
a lump sum of cash, purchase an immediate annuity or a combination of the two.
- The
annuity provides payments that continue for life, regardless of whether you remain
in your home.
- Counseling is required but does not have to be done by an
independent counselor.
- The loan becomes due when the borrower or surviving
co-borrower no longer lives in the home (as his principal residence) or dies.
- At
maturity, the lender receives the percentage of the home value (up to 80%) you
pledged when the loan was obtained. The remaining value returns to you or your
estate.
- If the value of the home when it is sold is less than the pledged
amount, the lender can only claim the sale price of the home.
- This program
is usually most cost effective if you plan to stay in your home for a number of
years.
- There may be income tax considerations in connection with the annuity
option and it may affect your eligibility for “need based” public assistance.
- Cash Account is a line of credit program.
- An open-ended
line of credit with a maximum limit is established for the borrower. The money
can be borrowed, repaid and borrowed again.
- The loan ends when the borrower
or surviving co-borrower dies or leaves the home.
- It does not include
an annuity.
- When the loan ends, principal, interest and fees are paid
to the lender, but not more than the sale price of the home.
- There is
an “equity sharing” option that increases the amount that can be borrowed in return
for giving the lender a share of the appreciated value of the home when it is
sold.
The interest rates for both these Financial Freedom
programs may be considerably higher than HECM rates.
Things to consider
before applying for a Reverse Mortgage.
Although most Reverse Mortgage brokers and lenders are ethical, some scams
have been reported. If you receive an offer from an “estate planning” service,
by phone or mail, to put you in touch with a Reverse Mortgage lender, the solicitor
may want you to pay a substantial fee for that service. HUD, Fannie Mae and most
lenders will not allow such a fee, since the information is available for little
or no cost from a counselor or an Internet site. Do not sign a service agreement
that includes a fee for this service. Also, be careful of solicitations that come
by phone or mail.
- Alternatives to Reverse Mortgages
There may be alternative ways of obtaining financial relief without taking
out a Reverse Mortgage. For example: if there is a problem making property tax
payments, your State Tax Board may offer a tax postponement service that works
much like a Reverse Mortgage. It is available to homeowners who are 62 years or
older, own their home (there can be a mortgage), and have an annual income of
$24,000 or less. The interest rate is much lower than for a Reverse Mortgage.
If the home is in need of repairs that you cannot afford to make, your
local Housing and Redevelopment Agency may have a Senior Loan Program that can
help. These loans also do not require repayment until the home is sold or you
move out. Interest rates are either low or there is no interest charge. Programs
for emergency repairs such as building ramps, widening doorways, etc. may also
be available. Check the white pages of your phone book under your county or city
name followed by “Housing.”
Assistance programs may be available for those
with special needs — blind, disabled, veterans — through these same agencies.
A Reverse Mortgage counselor will have the most current information about all
these programs in your area.
If you decide to take out a Reverse Mortgage
after you have signed up for any of these assistance programs, ask if they can
be subordinated to the new loan. Subordination means that you do not have to pay
off this loan in order to obtain the new one. Instead, the assistance loan becomes
secondary to the Reverse Mortgage. Many agencies will do this if they think it
appropriate.
Things to consider before closing the loan.
- Compare loan costs. Federal Truth-in-Lending regulations require the lender
to disclose the Total Annual Loan Cost (TALC) on all Reverse Mortgages at various
points in time. But lenders are not required to make this disclosure until after
you apply for a loan. Some lenders have Personal Reverse Mortgage Analysis software
that overcomes such difficulties. This is another good reason to consult a counselor
before you apply for a loan.
- Among the most important variables in the
total cost of Reverse Mortgages are the fees that are charged at the beginning
and during the loan. These could include origination fees, points, mortgage insurance
premiums, closing costs, monthly servicing fees, shared equity or appreciation
fees. Be sure you know what you are committing to pay.
- Most fees are assessed
at the start of the loan and make up a large portion of the total loan costs in
the first few years. Terminating a Reverse Mortgage after a year or two can be
very costly.
- Many lenders and brokers listed by HUD and Fannie Mae also
sell Reverse Mortgage products from other sources. Be sure you understand which
program they are suggesting.
- Beware of “shared appreciation” or “shared
equity” fees. These give the lender a share of any increase in the value of the
home between the time the loan is closed and when it ends (usually in return for
a larger loan amount). They can significantly increase the cost of the loan.
- Reverse
Mortgage loan documents can be long and confusing. At the closing, you will be
expected to sign or initial many pages. If you find any of the terms confusing
or you are uncertain about what they commit you to do, get independent advice
before you sign. This is particularly important if the loan you are considering
includes an annuity, since an annuity can have undisclosed income tax and “needs
based” assistance implications depending on the contract language.
Things
to consider during the life of the loan.
- Refinancing a Reverse
Mortgage can be very costly. HUD and Fannie Mae programs have some flexibility
in the way payments are made, which may make refinancing unnecessary. Consider
the costs carefully before deciding to refinance.
- Be sure to keep your
property tax and homeowner insurance premiums current. Failing to do so may lead
to additional charges from the lender or termination of the loan. If you are having
difficulty making payments, contact your lender. It may be possible to arrange
to make payments using loan funds.
A Reverse Mortgage may be exactly
what you need to improve your lifestyle or maintain your financial independence.
Other alternatives may work better or be less expensive. The best way to be sure
you made the correct choice is to be as well informed as possible before making
a decision.
What information is available?
At this time, the
Internet has the most information sources. Most of them cover the same basic subjects
but a few contain additional information. If you are unfamiliar with how the Internet
works, the staff at your library or Senior Center can help you. Addresses and
toll-free phone numbers you can use to become better informed are listed.
- Reverse.org
www.reverse.org
Reverse.org is an organization dedicated to helping
seniors make educated decisions about Reverse Mortgages.
- Reverse Mortgage Alert
http://reversemortgagealert.org/
ReverseMortgageAlert.org is a website that provides
information about reverse mortgages and loans and does
not offer loans or reverse mortgages directly or indirectly
through any representatives or agents.
- AARP Home Equity Information Center
601 E Street N.W.
Washington, DC 20049
800-209-8085
5 a.m.- 5 p.m. Pacific Time
www.aarp.org/revmort/
This website is a good source of basic information
and tips on selecting counselors and lenders. They also
publish a free consumer's guide on Reverse Mortgage borrowing,
“Home Made Money.” This completely rewritten book can
be read on-line or printed. A two-part video “Reverse
Mortgage Choices” is available for a $5.00 shipping and
handling charge.
- U.S. Department of Housing and Urban Development
Washington, DC 20410-8000
888-466-3487 or 800-217-6970
www.hud.gov
This website provides useful information about senior
housing issues. They include information about HECM and
Fannie Mae programs and lists HUD-approved counselors
and lenders.
- Federal National Mortgage Association (Fannie Mae)
800-732-6643
www.homepath.com
This website contains descriptions of HECM and Fannie
Mae programs, answers to frequently asked questions, lender
information and the complete financial needs assessment
outline mentioned earlier. They also publish a free guide,
“Money from Home: A Consumer's Guide to Reverse Mortgages,”
which can be ordered by phone.
- Consumers Union
1535 Mission Street
San Francisco, CA 94103
415-431-6747
www.consumersunion.org
Consumers Union has several publications (“Guarding
the Golden Years. Reverse Mortgages” and “Reverse Mortgage
Consumer Tip Sheet”) that describe benefits and things
to look out for with Reverse Mortgages. Both of these
can be printed from the website. They have recently published
a detailed, 59-page analysis of the advantages and pitfalls
of Reverse Mortgages, “There's No Place Like Home: The
Implications of Reverse Mortgages on Seniors.”
- National Reverse Mortgage Lenders Association
1625 Massachusetts Avenue, N.W., Suite 601
Washington, DC 20036
202-939-1760
www.reversemortgage.org