Reverse Mortgage Pros & cons

How to Decide if the Pros Outweigh the Cons

When you are considering a reverse mortgage, you need to review the reverse mortgage pros and cons. Review the following information which can aid you in your decision.

The PROS of Reverse Mortgages:

• No monthly mortgage payments! Reverse mortgages can eradicate existing monthly mortgage payments or liens. These will be transferred to your reverse mortgage balance and interest will accrue throughout the life of the loan.

• Tax free income insured by the Federal Government which continues as long as your home is your primary residence. Freedom from stress and worry.

• Change your plan at any time from a line of credit to monthly proceeds or a combination (depending on what remains.)

• Unlike an equity loan there is no minimum credit score requirement, although a credit report is required on all loans.

• You can remain in your home as long as you wish no matter what is owed the lender. You can never be forced out of your home as long as your real estate taxes and homeowner's insurance are paid and as long as you maintain your home according to FHA requirements.

• The HECM Line of Credit (LOC) option has many advantages for the senior borrower. First, the line of credit grows over time at the SAME EXACT rate as the interest rate on the loan. If you let the line sit there untouched for say five or ten years, it will be substantially larger at the end and ready for you to use. (See next section.)

• You can refinance your reverse mortgage as many times as you like as long as there is enough equity in your home to do so and if all the required HUD rules for the HECM refinance indicates a significant benefit to the borrower.

• Reverse mortgage are non-recourses loans. You can never owe more than your home is worth as the home is the only collateral. The HOUSE stands for the DEBT. Upon your passing, the reverse mortgage debt will not pass to your estate, and they will only be required to pay back the debt should they wish to sell or keep the home.

• Reverse mortgages have safeguards: capped interest rates, a limitation on fees, HUD counseling, asset protection (non-recourse loan), etc.

Reverse Mortgage Pros Continued

• NON-RECOURSE: You can never owe more than the home is worth. And none of your assets can be seized to repay the reverse mortgage debt. Whether you have bank accounts or investments, they cannot be used to satisfy the reverse mortgage balance because the HOUSE is the ONLY collateral that was used to secure the reverse mortgage as a security interest. Your HECM closing documents contained in the Mortgage Note states:

"11. Borrower shall have no personal liability for payment of the debt secured by this Security Instrument. Lender may enforce the debt only through sale of the Property. Lender shall not be permitted to obtain a deficiency judgment against Borrower if the Security Instrument is foreclosed." (MODEL MORTGAGE FORM ADJUSTABLE RATE (HOME EQUITY CONVERSION), Uniform Covenants #11.

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The HECM Line of Credit - A Line of Credit that GROWS!

Having an Advantage That Works

Not having to pay any monthly mortgage payments on the HECM is a great advantage. But what's even better is the LOC, Line of Credit feature. You can draw on your credit line whenever the need arises whether to enjoy life more or just to pay some bills. Here are some of the advantages of the HECM line of credit as compared to a HELOC/Home Equity Line of Credit:

Both the reverse mortgage line of credit and the conventional HELOC only accrue interest on monies drawn. But only the reverse mortgage line of credit has a growth rate on the unused portion of funds. The unused HECM line of credit grows over time at the compounding interest rate charged on the loan plus 1/2%. This gives borrowers greater borrowing power as the amount of money available for future access grows larger year after year. So, for example, if you took out the HECM line of credit at age 62 or 65 and left it untouched for 10 or 15 years, your money would have grown considerably. At that point, you can withdraw all or part of your remaining line of credit. If you do not use the line, it is not owed. (On the FHA HECM, the second draw of funds from the line of credit would occur 365 days after the funding of your loan).

Another advantage to the program is that the HECM line of credit stays open and cannot be closed at the lender's discretion. The line of credit stays open so the funds are there when you need them.

Maximizing Your Portfolio With a HECM

Market Swings Can Be Offset by the HECM

Financial planners used to give reverse mortgages a bad rap, but since the HECM safeguards have been enhanced from what they were before, this is no longer true. Reverse mortgages can be a valuable financial planning tool which can help retirees cover many of their lifestyle expenses and also enhance their retirement portfolios. Speak with your financial planner and advisor about the reverse mortgage and get their professional opinion. It may work well or may not.

Sooner Than Later - the HECM Advantage

Market Swings Can Be Offset by the HECM

Rather than obtaining your reverse mortgage out of sheer need or waiting till you are older, some financial planners suggest taking it out earlier to avoid future financial difficulties. Additionally, taking out the HECM sooner than later maximizes the growth of the HECM line of credit for those with a significant line of credit. After a considerable time and the growth rate on your line of credit, the amount available in the line would be larger, therefore, the line of credit is a great option for those not needing the money right away.

Your Retirement Income Plan - Line of Credit

HUD has designed the reverse mortgage to ensure borrowers have all the resources they need to fulfill all the requirements of the loan as it progresses throughout their life. Many financial planners who study income plans now see the benefits of a reverse mortgage and the advantages of using the home's equity for retirement income. Be sure to discuss your options with your family and financial advisor.

Free Quote - No Obligation

Your Retirement Income Plan - Line of Credit

Advisors Mortgage will provide you with a free HECM or proprietary jumbo proposal, and since this loan can be tailored to YOUR financial needs, we will work up different scenarios so you can choose which one works best for you. Advisors Mortgage is here to a answer your questions and concerns. Be among the many who enhanced their lifestyle and retirement portfolio with a reverse mortgage.

Reverse Mortgage Cons

HECM = Higher Closing Costs

Can Reduce Your Heirs Inheritance

A Reverse Mortgage has all the typical closing costs one finds with a typical FHA mortgage, but FHA HECM mortgage insurance premium fees are higher. The HECM has FHA mortgage insurance added at the outset of the loan and ongoing throughout the life of the loan. These are not out of pocket expenses. Instead, they are rolled up into the loan, but it's still a cost.

Can Reduce Your Heirs Inheritance

A Reverse mortgage can reduce your children's and grandchildren's inheritance because a reverse mortgage is a rising debt loan since no monthly mortgage payments are required, and there is accumulating interest on the loan so the balance increases over time. It is the opposite of a typical mortgage where equity in the home increases as mortgage payments are made.

Tenants Will Have to Vacate

Can Reduce Your Heirs Inheritance

Short-Term Reverses Don't Work

If you have tenants or relatives living with you, and should you pass away, they will have to pay off the HECM loan balance in order to remain in the home.

Your heirs can also choose to sell the home and keep the remaining equity after paying the lender. They would pay the full loan balance or 95 percent of the home’s appraised value, whichever is less.

Short-Term Reverses Don't Work

Your Home Must Be Your Primary

Short-Term Reverses Don't Work

Selling your home can provide a greater return on your investment than a Reverse Mortgage.

Moving from your residence in less than five years makes a Reverse Mortgage impractical. It does not make good sense to use a Reverse Mortgage short term due to the closing costs which you have paid.

You COULD Lose Your Home!

Your Home Must Be Your Primary

If you fail to pay your real estate taxes or homeowner's insurance or neglect to maintain your home, you could lose your home. You and the lender will ascertain if setting up a LESA, Life Expectancy Set Aside at the outset for taxes and insurance will be in your best interest. You will not have to worry about paying these; the lender will pay them for you

Your Home Must Be Your Primary

Borrowers are required to live in the home as their primary residence at least 6 months of the year. Also, if all borrowers leave the primary residence for a period exceeding 12 consecutive months, the reverse mortgage will become due and a demand for payment will be made by your lender. (Ex. Nursing home, assisted living, mental health facility).

more Things to Consider About Reverse Mortgages

Selling the Home=Better Proceeds For You

Your Heirs May Want to Keep Your Home - BUT

Selling your home can usually provide a greater return on your investment than a Reverse Mortgage by taking advantage of more of the home's equity that the reverse mortgage limits. You could sell your home to your children or sell the house outright and downsize to a more affordable home. Many senior homeowners rent after selling and find they have more spendable cash without having a mortgage (if one was in place before).

Your Heirs May Want to Keep Your Home - BUT

If your heirs wish to benefit from your home after your passing, they can sell the property and keep the remaining equity or they can get their own mortgage on the home. If your heirs wish to keep the property, they can repay the amount that is owed or 95% of the current appraised value, whichever is less. In selling, the lender will accept the 95% proceeds from the sale, and FHA will cover the remaining loan balance.

Medicaid Eligibility May Be Affected

Your Heirs May Want to Keep Your Home - BUT

Medicaid Eligibility May Be Affected

Medicaid and other financial assistance programs may be affected, and you may not qualify for benefits unless you spend down your Reverse Mortgage proceeds each and every month. Your reverse mortgage is not considered income but can be viewed as assets. (Check with your attorney and Medicaid administrator to discuss Medicaid's parameters).

When Not to Get a Reverse Mortgage

Things to Consider

• An equity loan may be a cheaper way of getting cash out of

your home as closing costs will be lower. But there will be a monthly mortgage payment.

• If your primary goal is fixing up your house and a community loan can provide adequate funds, that may be a better option.

• If you are ill or disabled and assisted living or a nursing home is imminent, do

not choose a Reverse Mortgage. If you leave your premises for 12 consecutive months and no other borrower remains, the loan will be due.

• The HECM, FHA reverse mortgage can be an expensive loan due to the 2% upfront mortgage insurance premium. This 2% fee is multiplied times the appraised valued on the home. Even though this is financed along with most of the closing costs, it is still a cost.

Eligibility for Medicaid: Reverse mortgages do not affect Medicare or Social Security. But they can affect your eligibility for Medicaid benefits. Check with your financial planner or Medicaid administrator.

• If your children invite you to move into their home and spend your remaining years with them, this might be an option. Many seniors find themselves able to move in with their children and benefit their heirs by doing so.

HECM COUNSELING IS REQUIRED. Your HUD-approved reverse mortgage counselor will aid you in determining how well a reverse mortgage will work for you and will review your alternatives. The reverse mortgage cannot proceed without this important HUD-required safeguard.

Everything in life deserves thought.

Whether it's a mortgage or another important matter that requires a decision, thinking and considering options has to be part of the equation. Thoroughly comparing the advantages and disadvantages of something will usually produce a good decision. What is good for one person may not be good for someone else. It has to do with YOUR perspective, the way you look at things, and what best works for you. We all see the world differently. We weigh our circumstances and consider our options. Consider the reverse mortgage. It might not be for you, but then again, it just might work to your benefit.

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Asking the Right Questions

Asking the right questions can help you determine if a Reverse Mortgage is the right vehicle for you. After all, a Reverse Mortgage is not for everyone.

* Am I going to stay in my home for the foreseeable future?

* Do I want to leave my home to my children and grandchildren?

* Am I concerned about a relative or friend or renter whose living arrangements will change when I pass away due to me having a reverse mortgage?

* Am I able to maintain my home and pay my taxes and insurance if I previously had these in escrow at my mortgage company? Do I understand that I could lose my home if I fail to pay my taxes and my property insurance?

* If I have no mortgage and need money for home improvements, perhaps $20-30,000, does a reverse mortgage make sense?

* Have I considered alternate options other than a reverse mortgage?

* How would my life change if I could get rid of my mortgage payments and have money left over each month to do the things I've been wanting to do?

* Will the reverse mortgage change my life enough for me to warrant getting a reverse mortgage?

All these questions are legitimate questions senior borrowers might consider. Consult with family and trusted advisors. A free quote will give you the numbers and figures so you will see firsthand how much money is available to you.

Grants are another alternative for borrowers who only need a little cash for home improvements.

To help seniors, the government offers home improvement grants for seniors. These grants are useful to help seniors to pay for home improvement. By using grants, it is possible for you to reduce the overall cost of the repair. Contact your local municipality or community assistance organization to find out about programs for doing repairs on your home that may not be required to be paid off until you move out of the home, refinance, or pass away. The National Council on Aging can help or your local office for the aging.

Not looking for a reverse mortgage?

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ADVISORS MORTGAGE GROUP, LLC., WE TAILOR LOANS TO MEET YOUR NEEDS -Branch NMLS 1833015, 3265 Merrick Road, Wantagh, NY 11793 - Phone: 888-843-9797 or direct: 631-804-9044 - Licensing: CA: Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act; FL; GA Residential Mortgage Licensee; NJ: Licensed by the New Jersey Department of Banking and Insurance; Licensed Mortgage Banker –OH; PA; TX. www.nmlsconsumeraccess.org

Kathie Adler, Residential Mortgage Loan Originator and Reverse Mortgage Specialist, NMLS# 65780 - Branch office located at 3265 Merrick Rd., Wantagh, NY 11793 – Branch NMLS# 1833015 Equal Housing Opportunity

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