Should falling home prices keep you from getting a reverse loan?

by Francine Huff
January 31st, 2011

Home prices are still falling, which means that you may not be able to borrow as much money as you’d like with a reverse mortgage. Home prices in the fourth period of 2010 fell from a year earlier in all 28 major metropolitan areas tracked through the Wall Street Journal’s most recent quarterly survey.

Hard-hit markets hit again

Among the cities that experienced the the biggest declines in home values are Miami, Orlando, Atlanta and Chicago. Those cities had already experienced significant drops in property values. But even cities like Seattle and Portland, Oregon, which had held up pretty well during the housing downturn, saw home prices decline more.

No money, bad credit

The survey also shows that the inventory of homes on the market rose at the end of December to an average of 15 months’ supply. Many potential buyers are not purchasing homes because they believe housing prices may continue to fall or they cannot qualify for mortgages.

“There are just not a lot of renters with confidence, with a down payment, with good credit, and without a lot of additional debt,” John Burns, a home builder consultant in Irvine, Calif., told the Wall Street Journal.

Should you get a reverse loan?

Falling home prices may signal that this is not the time to apply for a reverse home mortgage. That’s because the amount of money you qualify to borrow depends on your home’s value, your age and interest rates. If home prices have been dragged down in your area because of foreclosures and weakness in the housing market, you may not receive enough of a payout to make borrowing worthwhile.

On the other hand, if you have a lot of equity and are afraid prices are going to continue to decline, it could make sense to tap your home equity now with a reverse loan. Discuss your financial situation with a housing counselor approved by the Department of Housing and Urban Development to get the tools you need to make the right decision.

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Can you get a reverse mortgage with bad credit?

by Francine Huff
January 27th, 2011

A reverse loan could help supplement your retirement income, giving you more funds for medical costs, property taxes, home improvements or other expenses. But if you already have a lot of credit card debt and bad credit, you may be wondering if you can qualify for a reverse loan.

Age is more important

When it comes to getting a reverse home mortgage your age matters more than your credit score. In fact, many seniors use reverse loans to pay off credit card debt. In order to qualify for a reverse mortgage you must be at least 62 years old and have enough equity in a home to convert some of it to cash. Usually it’s a good idea to wait as long as you can before applying for a reverse loan, because the older you are the more money you can usually qualify to receive.

Of course that payout also depends upon your home’s value. If you’ve lost a significant amount of home equity because of the housing downturn it may be difficult to get a reverse mortgage. Being underwater on a mortgage also will keep you from getting a reverse loan.

Reverse mortgage pays you

With a reverse loan you trade in monthly mortgage payments for a cash payout. The proceeds from a reverse mortgage can be received as a lump sum, regular installments or a line of credit. You can also receive the money through a combination of those payment methods.

Using reverse mortgage proceeds to pay off credit cards could allow you to get rid of debt that is dragging down your credit score. It’s important, however, to change poor spending habits that could result you accumulating even more debt.

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Adults to seniors: keep the money

by Peter G. Miller
January 26th, 2011

One of the more curious questions regarding reverse mortgages involves the matter of heirs and inheritances. Is it fair for seniors to get a reverse mortgage and therefore leave a smaller estate to adult children?

The National Reverse Mortgage Lenders Association (NRMLA) has come out with an interesting study which touches on a number of issues. One of the most interesting concerns the smaller versus larger estate issue. The responses may be surprising.

The study — The Retirement Abyss: America’s Seniors’ Search for Security — involved a survey of 1,800 people: 600 respondents who have held a reverse mortgage for a minimum of two years, 600 respondents without reverse mortgages who own their own their homes and whose mortgage loan balance is no more than 50 percent of their home equity, and 600 individuals 45 years and older with at least one surviving parent.

Among many questions one set gave respondents three choices:

___I hope to leave my children (and heirs) an inheritance, or

___ I want to be able to pay all my bills so my children do not have to worry about me, or

___my parents should take care of themselves and not worry about me.

The responses were interesting because read more

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3 reasons not to get a reverse loan

by Francine Huff
January 25th, 2011

You may be interested in getting a reverse loan to put more cash in your pocket. While reverse mortgages can certainly help supplement retirement income, it’s important to consider a few drawbacks to borrowing money this way.

  1. You may out live the income. The HECM Saver has made it more affordable for senior citizens to convert the equity in their homes into cash. However, although the HECM Saver has lower fees, the amount of money that you can borrow is less than with HECM Standard reverse mortgage. Regardless of which type of reverse mortgage you are interested in, consider the possibility that neither will provide enough income to last the remainder of your lifetime. If you can’t pay your bills without proceeds from a reverse mortgage, what will you do when the money runs out?
  2. You may be about to blow the money. Be honest with yourself. Do you want a reverse mortgage to pay household bills, property taxes or or health care expenses; or are you looking for extra cash to take an expensive vacation, pay for club dues or simply to have more funds for dining out and entertainment? A reverse loan can help improve the qualify of your life, but avoid using the money for frivolous extras.
  3. There may be alternatives to borrowing money. Do not apply for a reverse mortgage without considering other programs and services that may help you. A reverse mortgage counselor can analyze your situation to determine if there are other things that can be done to improve your finances without tapping home equity.

Your financial future

Keep in mind that even if you just want a reverse mortgage to make a few fun purchases now, your situation could drastically change in a few years and you could end up worse off financially. It may make sense to skip getting a reverse loan for now so that the option is still available if you ever really need to borrow money for an emergency later.

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Get a reverse loan or file for bankruptcy?

by Francine Huff
January 24th, 2011

Having thousands of dollars in debt and no way to pay it off can seriously affect the quality of your life if you are on a fixed income. Some seniors who are drowning in debt consider filing for bankruptcy. But is it possible that a reverse mortgage might solve your financial problems?

Reverse loan and home equity

Reverse mortgages allow you to convert home equity into cash. The money can be taken as a lump sum, line of credit or through installments. You have flexibility to use a portion of the money to pay off debt, then access additional funds in the future as you need money. However, getting a reverse loan means that you are simply transferring existing debt to a loan secured by your home. You won’t have monthly mortgage payments, and the reverse loan will have to be repaid when you move from the home or die.

Bankruptcy and your assets

Filing for bankruptcy is probably one of the most serious financial decisions you can make. A Chapter 7 bankruptcy filing could allow you to wipe out most of your consumer debt. Chapter 7 allows property to be liquidated to pay off money owed. A Chapter 13 bankruptcy requires setting up some sort of payment plan to pay off some or all of your debt and you need income for payments. Keep in mind that home equity is protected in bankruptcy and a bankruptcy does not keep you from getting approved for a reverse loan.

Money advice

It’s important to consult with a knowledgeable reverse mortgage counselor to learn more about how borrowing money could help you remain in your home. If your debts are too large to be helped by a reverse home mortgage, you’ll need to meet with a debt counselor to discuss available options. If you choose to file bankruptcy, retain an attorney that specializes in this area.

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Seniors can use reverse loans to pay off debt

by Francine Huff
January 19th, 2011

A recent survey by CESI Debt Solutions found that 40 percent of retired senior citizens have credit card debt and do not plan to pay it off before they die. Much of that debt has accumulated as many seniors struggle to keep up with the cost of medical care, housing and other expenses. About 75 percent of those surveyed blamed their debt on medical and funeral expenses.

“At the end of the day, some people of a certain age say, ‘It’s too late in the game for me to do anything about it. I can’t win. So I’m just going to stop playing the game,’ ” Neil Ellington, executive vice president at CESI, said in a USA Today article.

Retirement income doesn’t stretch

It can be tough to live on a fixed income that does not cover all your bills. But racking up huge credit card bills to pay expenses is not the best solution. It may be necessary to talk with a debt counselor and retirement advisor to find some solutions to your money problems. If you have equity in your home, a reverse mortgage counselor can help determine if a reverse loan can help.

Reverse loans have pros and cons

Reverse home mortgages are only available to people aged 62 and up who own their own home. When you take a reverse mortgage you covert home equity to cash, something you should thing long and hard about doing. While the proceeds from a reverse loan can go toward paying down credit card debt, it’s important to make sure you fully understand all the costs of borrowing money. If you use a reverse loan for debt, how do you plan to change your behavior to make sure you don’t end up in debt again? Reverse mortgages can help with debt payoff, but should not be used as a short-term fix for poor financial habits.

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Reverse mortgage use up 8-fold since 2001

by Peter G. Miller
January 19th, 2011

A new study by the National Association of Home Builders and the MetLife Mature Market Institute shows that the use of reverse mortgages has grown substantially in recent years — and also that the market for such financial products is largely untapped.

According to the Housing Trends Update for the 55+ Market, the number of seniors with home equity conversion mortgages (HECMs) increased from 31,822 in 2001 to 241,345.

In comparison to the 241,345 reverse mortgages outstanding, seniors held 12,340,807 regular mortgages in 2009 other mortgages while 18,355,917 senior households were mortgage-free. Seen another way read more

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What if you can’t get a reverse loan?

by Francine Huff
January 18th, 2011

Not everyone who wants to get a reverse mortgage is able to get one. Not only do you have to be 62 or older, but you must have enough equity in your home to qualify for a loan. So what should you do if you need help with your finances but can’t get a reverse loan?

Get debt counseling

When you have a lot of debt it can be overwhelming. A debt counselor can work with you to put together a debt reduction plan by examining your current income and expenses. The counselor also may be able to pinpoint any emotional spending or other issues that may be contributing to poor financial habits.

Sell your home

If you don’t have enough income to cover all your housing expenses and still owe money on a mortgage, it may be time to consider selling. Do you owe more on a mortgage than your house is worth? Talk with your mortgage lender about doing a short sale, which would allow you to sell for less than what’s owed on the home loan.

Look for help locally

There may be agencies in your community that offer assistance to senior citizens. The local council on aging, religious groups, community centers, or senior citizens organizations may have information about programs that can help with your finances. You may qualify for assistance with utility bills, home improvements, and other expenses, so explore all your options.

Seek out low-cost or free help from an estate planner who can look at all areas of your finances to make recommendations. It’s important to put together a comprehensive retirement plan whether you plan to remain in your home with the help of a reverse home mortgage or sell it.

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Reverse mortgage planning

by Francine Huff
January 17th, 2011

Many senior citizens have benefited from reverse mortgages. The loans can be used to supplement retirement income and have gotten a more serious look from people looking for solutions to their financial woes. It is important, however, to do some very careful planning when investigating whether a reverse loan can help you.

Pros and cons of reverse mortgage loans

Reverse loans can positively impact your finances. The money received can be used for most purposes and does not have to be repaid until you move or pass away. Also, if you are at least 62 years old and have a decent amount of home equity, getting approved for a loan is easy.

But you should not take the decision to get a reverse mortgage lightly. You’ll have to pay a variety of fees to borrow money and need to consider these costs carefully. A knowledgeable reverse loan counselor can help crunch all the numbers to determine the true cost of borrowing money. He or she should look at your income, savings, and other benefits you are currently receiving to determine how a reverse home mortgage might benefit your finances.

Choosing a reverse loan counselor

Take time to question potential reverse mortgage counselors about his or her credentials. Counselors are required to pass an exam approved by the Department of Housing and Urban Development (HUD) and to get ongoing training. The counselor you choose also should be able to discuss alternatives to borrowing with a reverse mortgage. Getting a loan may not be the right choice for you, so it is important to know what other options programs and services may be available to you.

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Reverse mortgages and long-term care insurance

by Francine Huff
January 13th, 2011

Some senior citizens use the proceeds from reverse mortgages to purchase long-term care insurance. Buying an insurance policy is a big investment, so it’s important to evaluate your situation carefully before deciding to use a reverse loan for this financial product.

Why consider long-term care insurance?

Many senior citizens are living well into their 80s and beyond. Many of these people will require care for many years and may not have enough funds to cover years of expenses. Long-term care insurance can help people pay for medical costs that are not covered by medical insurance or Medicare. It can also help pay for a nursing home, assisted living, or in-home care.

The amount you pay for a long-term care insurance policy depends upon a number of factors, including your current age, health condition, and type of benefits you want. You may be turned down for a policy if you are being treated for a serious medical condition.

How a reverse mortgage can help

People who can’t afford the premiums for an insurance policy sometimes turn to a reverse mortgage to get the funds. Reverse mortgages have pros and cons, but one of the things that makes them popular is that you can use the proceeds for pretty much any purpose, including insurance. But reverse loans can have a lot of fees and drain your home equity.

Evaluating reverse loans

It is important to discuss your interest in using a reverse home mortgage for long-term care insurance with a knowledgeable housing counselor. Getting a loan may not be the right decision based upon your financial situation, and it is important to find someone who can discuss other alternatives.

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Reverse mortgage delinquencies trouble FHA program

by Peter G. Miller
January 12th, 2011

Back in October a government report found that more than 20,000 FHA-insured reverse mortgages were in default, including nearly 13,000 that were unknown and unreported to HUD.

This situation raises two questions: First, how is it possible for a reverse home mortgage to be delinquent when there are no monthly costs for principal and interest? Second, what can HUD do about it?

There are reverse mortgage pros and cons and one of the great pros is that read more

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Help for reverse loan borrowers behind on tax and insurance payments

by Francine Huff
January 11th, 2011

The Federal Housing Administration has issued guidance for reverse mortgage lenders and borrowers who have fallen behind on property tax and insurance payments. The guidance is aimed at helping reverse loan borrowers who may be at risk of foreclosure.

HECM, taxes and insurance

Under the Home Equity Conversion Mortgage (HECM) program, reverse loan borrowers must stay current on property tax and homeowners insurance payments. If a homeowner falls behind on payments, HUD rules allow reverse mortgage lenders to make tax and insurance payments from the borrower’s available mortgage funds. Once those funds are gone, the lender has to advance funds and later be reimbursed by the borrower.

Some reverse mortgage borrowers have become seriously delinquent on payments and are at risk of foreclosure. The FHA guidance “reminds lenders that foreclosure is to be a last resort when dealing with their elderly clients,” according to a statement from HUD. Reverse mortgage lenders and servicers must exhaust all resources to work with borrowers to bring loans current before resorting to foreclosure.

Reverse mortgage help

So what can you expect if you’ve fallen behind on tax and insurance payments? First, your reverse mortgage lender must send you a letter if you recently missed a property tax payment or have had an unpaid balance for an extended period. Second, your lender should offer assistance, such as a referral to a HUD-approved reverse mortgage counselor to get free help. They may also refinance the reverse loan or set up a repayment plan for the delinquent charges.

Do not avoid getting help if you are having trouble keeping up with property tax and insurance payments. In most cases, reverse mortgage lenders would rather come to a solution that works for all parties involved than have to resort to foreclosure proceedings.

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Can my kids move back home if I have a reverse mortgage?

by Francine Huff
January 10th, 2011

Many families are finding themselves sharing living quarters as they struggle to survive tough economic times. About 49 million Americans, or 16.1 percent of the U.S. population, lived in multi-generational households in 2008, according to the Pew Research Center. You, too, may be considering living with relatives and searching for ways to pay all the expenses.

Who can get a reverse loan?

While a reverse mortgage can allow senior citizens to convert home equity to cash, there are some things to consider. You can only apply for a reverse home mortgage if you are homeowner and at least 62 years old. Your name must be on the deed to your home and you cannot own it jointly with relatives under the age of 62, including your spouse.

There is no rule that says you cannot apply for a reverse mortgage if your kids or other relatives move in with you. You can even choose to leave the house to relatives who live in the home. But after your death reverse mortgage heirs must pay off the reverse loan if they want to keep the house. They can do that by coming up with enough cash to pay off the loan or they can use the proceeds from any life insurance policies or investments that you leave for them in a will. In some cases, the reverse mortgage lender might allow your heirs to refinance the property so they can keep it.

Reverse mortgages and relatives

A reverse loan counselor can help you learn more about the pros and cons of borrowing money to supplement your income. It may not be a good idea to convert home equity to cash to support your relatives, no matter how much you want to help them. Ultimately, you need to make your retirement income last as long as possible so it’s important that if relatives are going to live with you they contribute financially as much as they can.

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Working longer and reverse loans during retirement

by Francine Huff
January 5th, 2011

We recently wrote about how a large percentage of Americans who were polled believe that they will have to work during retirement to make ends meet. Whether to continue working is an important decision that could mean the difference between living comfortably in retirement or constantly struggling to make ends meet on a fixed income.

Working to save more money

If you got a late start with saving for retirement, it makes sense to remain in the work force as long as possible. That would allow you to save more in a retirement fund and pay off debt, including the mortgage and credit cards. Putting in more years with your employer also may allow you to receive a better healthcare package when you do retire.

Using a reverse mortgage

Working longer is also a way to delay tapping home equity with a reverse home mortgage. While reverse mortgages can help supplement your retirement income, you can actually receive more money by waiting a few years. That’s because the amount you receive with a reverse loan increases as you age. It also depends upon the value of your home and current interest rates.

Consider all your options

Find a knowledgeable reverse mortgage counselor and estate planner to discuss various options for funding your retirement years. There may be programs that assist seniors that you are not aware of and a professional can review them with you. Borrowing with a reverse home mortgage is an important financial decision so it makes sense to get as much information as possible about the pros and cons of getting a loan while you are still working.

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NCOA gets funds for reverse mortgage counseling

by Francine Huff
January 5th, 2011

The National Council on Aging (NCOA) has received $2.53 million to continue offering reverse mortgage counseling to senior citizens. The funds are provided by the U.S. Department of Housing and Urban Development (HUD). Some of the funds will go toward supporting new reverse mortgage counseling mandates that were approved by HUD in September 2010. The money also will help develop counseling strategies at various Area Agencies on Aging.

Reverse mortgage guidelines

Homeowners who are 62 and up may be eligible to take a reverse loan. You must have enough home equity to qualify, with little or no mortgage debt. If you aren’t sure if you qualify for a reverse home mortgage, a counseling session can help you figure that out.

“As Boomers retire, many will look for solutions to help them remain economically secure in their own homes,”said NCOA CEO James Firman in a statement. “Unbiased counseling is essential to keeping them informed about their options when considering a reverse mortgage.”

Reverse loan counseling session

You should receive a thorough analysis of your finances at the reverse mortgage counseling session. A counselor will review your current income, expenses, and debt in addition to discussing reverse mortgage guidelines and alternatives to reverse loans. There may be other programs that help seniors remain in their homes, and a counselor can determine if you qualify for assistance.

When choosing a reverse loan counselor, look for someone who has received HUD-approved training. Reverse mortgage counselors also must pass a HUD-approved exam and receive ongoing training.

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