Reverse Mortgage Guide

Like the U.S., Australia has reverse mortgages and like the U.S. fees and charges vary enormously.

Australia’s Investor Daily says a new study found that minor differences in reverse mortgage fees and charges could produce big cost differentials for borrowers.

How big?

Hold on to your wallet.

“A report from broker Seniors First Finance found large discrepancies in the interest and fees charged by different lenders servicing the $1 billion market.

“In one example, an interest rate of 9.07 per cent with monthly fees of $12 on a loan of $100,000 would incur a total cost of $525,000 over 20 years.”

And, says the newsletter:

“This was $107,000 more than the same loan amount offered by a reverse mortgage specialist that charged interest of 8.2 per cent. The consumer would incur a total cost on that loan of $418,000.”

Given that math works the same way both here and Down Under, the need for complete amortization statements is obvious — statements that are available to borrowers online and in advance of any loan application or commitment.

While reverse mortgages have many attractive aspects, steep up-front fees have not been among them. Now, however, a lender says that it’s offering reverse mortgages with lower up-front costs.
Reverse Mortgage Lending explains that the “high efficiency and decreased costs of internet marketing have lowered the company’s costs, allowing them to pass those savings on to […] read more

Beginning August 20th you’ll be able to get an FHA reverse mortgage — as HUD calls home equity conversion mortgages (HECMs)– that uses the LIBOR index rather than an index based on Treasury securities.
LIBOR — the London Inter-Bank Offered Rate — is an index widely used in Europe and overseas generally. It tends to track […] read more

I saw a headline that got my attention:
“Reverse Mortgages – A Tax Free Income for Senior Citizens”
Huh?
Whatever a reverse mortgage is, it isn’t tax-free income.
Income is something earned from land, labor, capital or entrepreneurial activity.
Money from a reverse mortgage is not income. Whether paid in a lump sum or over time it’s just the proceeds from a loan.
The reason cash from a reverse mortgage is […] read more

The Seattle Mortgage Company was acquired by the Bank of America in June, now in July it’s the sale Liberty Reverse Mortgage to Genworth for $50 million.You have to figure that major reverse mortgage lenders are not being purchased because the buyers expect a decline in the marketplace for elder services. These purchases suggest at least that there is a significant long-term […] read more

If you’re a senior looking for investment help you might want to use a little caution.
As The New York Times reports, “as older Americans’ wealth has grown, so too have programs that offer quickly earned credentials or that teach agents how to sell to the elderly. The number of certified senior advisers has increased by […] read more

I found an interesting item on the “Retirement Visions” blog that relates to reverse mortgages.
This is an interesting post in the sense that the writer is not selling reverse mortgages and also is “not a financial planner, accountant, attorney, or mortgage banker.”
Imagine, thoughts about reverse mortgages from an actual human. What a concept.
As you might expect, Senior Citizens Should […] read more

To get a reverse mortgage all borrowers must be age 62 and above. But how can you get a reverse mortgage if one spouse is significantly younger than the other, if one is 62 and the other is, say age 50?
One idea is for the younger spouse to quitclaim his or her interest to the […] read more

If you’re in the market for a reverse mortgage here are some useful questions to ask:
How old must I be to qualify? (Generally you must be age 62 or above).
Can I get a reverse mortgage if there is now a loan on my property?
What is the start rate for the loan?
When does the loan adjust?
How […] read more

Reverse mortgages have plusses and minuses and one of the minuses is that ultimately borrowed money must be paid back.
Generally repaying a reverse mortgage falls into two categories: Loans that must be repaid and loans that are repaid electively.
With a reverse mortgage the usual deal is this: You have no obligation during your lifetime to […] read more

Does the VA need a reverse mortgage product?
Since May — when H.R. 2475 was introduced to create such a product — there has been little interest in moving forward with such legislation.
The issue is not that veterans are not deserving, but rather the fact that FHA already has such a product in place, one […] read more

Can you finance any property with a HUD reverse mortgage (HECM)?
It turns out that the answer is certainly no. What HUD wants are homes that exist — that are not under construction — as well as homes with equity where HUD can be the first lien holder.
What are the exact rules? Here’s what HUD has to say:
For the HECM program, FHA defines existing properties as […] read more

If you’ve been thinking of getting a reverse mortgage you may wonder how you will be paid. In general terms you have six options:
Line of Credit: Just a like a home equity loan, with a line of credit you can borrow against you credit line up to a maximum limit.
Modified Term: This is an arrangement […] read more

Here’s a nice idea relating to reverse mortgages. For 20 points, can you guess what’s wrong with this picture?
Last year the state of California passed a reverse mortgage consumer protection bill, SB 1609, legislation which was subsequently signed by the governor.
This law, according to Governor Arnold Schwarzenegger’s office, “prohibits a reverse mortgage lender from accepting […] read more

Fannie Mae has come up with a series of checklists that can be used to provide a realistic look at retirement finances.
Fannie Mae’s Money From Home Guide is available online. It looks at both the FHA HECM program as well as Fannie Mae’s very own Home Keeper program and contains a lot of useful information.
One of the most useful […] read more

One of the most interesting wrinkles of the FHA reverse mortgage program is that it can be used for single-family homes — and also for properties with two, three and four units.
The requirement is that the owner must live in one of the units. This leads to two interesting ideas:
First, you can get a […] read more

Last month I wrote about the REX program, a reverse mortgage where the lender (Rex & Co.) is paid on the basis of increased equity if the value of the home goes up — and where the lender takes on part of the loss if the value of the property declines. In other words, a […] read more

Many people are discomforted with reverse mortgages because we all want time to hold still and also because we worry about our estate and what we will leave to the people and institutions we value.
Can you have your financial cake and eat it also?
One idea to consider is that if you want a reverse mortgage […] read more

The Federal Trade Commission, which sells nothing, has an excellent online discussion of reverse mortgages.
Why shop with care for a reverse mortgage?
“HECMs and proprietary reverse mortgages tend to be more costly than other home loans,” says the FTC. ”The up-front costs can be high, so they are generally most expensive if you stay in your home for just a […] read more

Does your reverse lender own your mortgage?
Loans are either held by lenders in portfolios or sold to mortgage buyers. Mortgage buyers can be found on what is called the “secondary” market. To sell their loans on the secondary market, lenders must originate mortgages that meet certain standards in terms of size, paperwork, etc.
As a borrower […] read more