Purchasing a Home with a Reverse Mortgage.

For the most part, the paperwork and the guidelines regarding this mortgage are the same as those regarding the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM), which is an FHA loan.  The option to purchase a home with a reverse mortgage was set to be available January 1, 2009, although as of writing this article is still undergoing final guideline and FHA regulation. The purchase reverse mortgage came out of the Housing and Economic Recovery Act of 2008. (This may be the best thing to come from this Act, because frankly many other things failed miserably.)

The main benefit of purchasing a home with a reverse mortgage is because now with this option;

1. The purchaser does not have to qualify and close on a traditional mortgage, and than
2. Refinance into a reverse mortgage

Aside from the hassle of closing two loans, the home buyer would have to pay closing costs twice.  OUCH. That's no way to treat our seniors!

Let's review some common reverse mortgage (HECM) guidelines.

1. Must be 62 years old
2. The property must be the borrower's primary residence
3. With a traditional reverse mortgage refinance, a fair amount of equity is required.  With a purchase reverse mortgage scenario, the borrower must provide the monetary investment at closing from an allowable funding source.

* Allowable Funding Sources *

When purchasing a home using a reverse mortgage, the monetary investment will be for (at least) the difference between the maximum reverse mortgage amount allowed and the purchase price. This will vary based on the sales price of a home among other factors.

Example: If the sales agreement is for $100,000, and the maximum allowable amount for the reverse mortgage is 60% of the purchase price, than the borrower will be required to come up the difference, or 40% ($40,000), plus any applicable closing costs.

A Borrower may only use their own money or money obtained from the sale of property or other assets. This includes retirement accounts, the sale of a home(s), the sale of fine art, etc.

VERY IMPORTANT POINTS TO PONDER

With a reverse mortgage purchase, these items below are NOT allowed.

1. No discount points are allowed
2. There are no rate buy-down options
3. No gifts are allowed (as in, a financial gift from a relative)
4. No closing cost assistance (seller concessions)
5. No builder incentives
6. No seller contributions
7. No seller financing

Unlike traditional FHA financing, monetary gifts from family members are not allowed. You also may not obtain personal loans, cash advances from credit cards, or EVEN equity from a property's home equity line. Lenders are required to source all funds used in the transaction.

A home buyer may elect to put more money down than the minimum required, so that they can leave a portion of the reverse mortgage available as a home equity line for future use.

Real Estate Agents

If you are a real estate agent looking to help clients out that are utilizing a reverse mortgage to purchase a home, keep in mind these important factors:

1. Required repairs must be completed before settling on the home,
2. These repairs must be included in the purchase agreement,
3. The buyer can NOT put any money into repairs of the property before they own the home, and
4. All offers must be contingent on a satisfactory inspection conducted by a qualified inspector.

One of the factors I found interesting is that a reverse mortgage client may choose to cancel the transaction at any time prior to closing. This is not to say that they will not lose their deposit money, but they do have this option. One other difference in a reverse mortgage purchase loan versus a traditional reverse mortgage (refinance) is that there is no 3-day rescission period. Once settled, that's it.

This wraps up our series on reverse mortgages. If you would like to visit any of the other posts on reverse mortgages, check out the links below.

As always, if you have any questions or need any assistance at all, feel free to call Steve Kappre direct at 856-419-3561.

 

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

There are several main questions asked regarding the end of a reverse mortgage loan. These questions are;

1. What happens if I owe more than my house is worth?

2. How long will my reverse mortgage last?

3. What will I owe when my mortgage is due?

4. What happens if I have to leave my home?

5. What happens when I pass my home to my heirs?

The answers here will be accurate but will not go into extreme detail. There are many variables and scenarios, and such situations can be evaluated on a case-by-case basis.

Q. What happens if I owe more than my house is worth?

A. If a reverse mortgage is utilized for a period of time where the homeowner owes more than the value of the home, they need not fear. The mortgage insurance that is required on a reverse mortgage (HECM) is insurance for just such a case. When the home is sold, only what the home is sold for at a fair market value will be required. In addition to that, Realtor costs and the costs of sale will also be backed out of the equation. So the short answer is, if you owe more than the value of the home, the difference is forgiven! (Further explanation below).

Q. How long will my reverse mortgage last?

A. As long as the home owner lives in the home. If the home owner passes away or if they are required to live at another place full time, than one would be required to refinance or sell the home. Reverse mortgages are only for owner-occupied homes. Likewise, if the property is passed to the heirs, than they would be require to refinance or sell the property.

Q. What will I owe when my mortgage is due?

A. This was partially answered above. First, in a normal scenario, you subtract the cost of sales and the current reverse mortgage balance to see what your net proceeds are; just like in a normal mortgage/ home sale scenario. But to reiterate when you sell the property, and more is owed than the sales price, one will only owe the;

Sales Price (-) Settlement Costs (-) amount of reverse mortgage owed only up to the remaining amount left.

For Example: If you sell your home for $200,000, but $250,000 is owed on the reverse mortgage and the cost of sale is $10,000, than the equation would look like this:

$200,000 (-) $10,000 = $190,000. YOU WOULD ONLY OWE $190,000.  You would walk away with $0, and the $60,000 would be forgiven. 

 

Stay tuned for more information regarding a reverse mortgage.

If you need immediate assistance regarding a reverse mortgage, feel free to contact Steve Kappre at 856-419-3561.

 

 

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

 

 

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

Is My Reverse Mortgage Taxable?

Money received from a reverse mortgage is not taxable as additional income. Remember, this is a loan you are taking out. This is already your money, so to speak. A reverse mortgage does not affect regular social security income. A reverse mortgage also does not affect Medicare benefits.

One thing you may want to do to be certain a reverse mortgage does not affect any other important areas of your life, is to contact your local Agency on Aging.  A toll-free number for this office is 1-800-677-1116. You may also visit www.eldercare.gov for more information.

~ Use it to make your retirement years the very best of your life. ~

 

How can I use my reverse mortgage money?

You can use the money you obtain from a reverse mortgage to do any number of things. Some ideas on how you may use your reverse mortgage money;

• Home repairs or renovations
• Home additions, such as a bedroom or a wheelchair ramp
• Payment for medical bills or care
• Payment for a grandchild's needs
• Educational endeavors
• Vacations
• Buying a vacation home
• Buying a vehicle
• Virtually any other way you decide!

You can simply choose a reverse mortgage to get rid of your current bills, or you can be extravagant and travel the world. It really is up to you. You can use it to make your retirement years the very best of your life.

We hope you find our future reverse mortgage posts informative as well. Stay tuned.

If you have additional questions or need immediate assistance, feel free to call Steve Kappre on his cell phone at 856-419-3561.

 

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

Reverse Mortgage Counseling

One of the wonderful things about reverse mortgages, is that everyone obtaining a reverse mortgage must go through counseling. Counseling is a time of education where you can ask as many questions as you like. You can also uncover some things that maybe you did not think about.  Counseling must be done before you can obtain a loan.

In your session you will learn about alternative options to a reverse mortgage. You will also learn about the expected and estimated costs to obtain a reverse mortgage. It is great that this safeguard has been put into place to protect seniors from lenders that do not have intentions to work ethically with them.

You can get the name of a local agency to conduct this session from your reverse mortgage lender. If you do not have a reverse mortgage lender, you can also call AARP's toll free number at 1-800-209-8085, or HUD's Housing Counseling service at 1-800-509-4287.

We hope you find our future reverse mortgage posts informative as well. Stay tuned.

If you have additional questions or need immediate assistance, feel free to call Steve Kappre on his cell phone at 856-419-3561.

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

In this installment on reverse mortgages we will discuss a few items;

• The expected costs of a reverse mortgage,
  
• If an appraisal is needed, and
  
• Who holds title to your home.

Expected Costs of a Reverse Mortgage

The costs of a reverse mortgage are very similar to that of a typical purchase or refinance transaction. Expect to pay an origination fee (often referred to as points), title insurance, government recoding fees, a mortgage insurance fee (for the Home Equity Conversion Mortgage - HECM, FHA's reverse mortgage), and other typical mortgage costs.

The one item that is more costly on a Home Equity Conversion Mortgage (HECM) is the upfront mortgage insurance fee. Upfront does not mean that it has to be paid out-of-pocket. Assuming the home has ample equity in it, all costs can be rolled into a reverse mortgage so that nothing out of pocket is needed. Expect the mortgage insurance premium to be about 2% of the loan amount.

Why Mortgage Insurance is So Important for Reverse Mortgages

The insurance premium you pay on a reverse mortgage is essentially more expensive because it insures something very variable, and that is the future estimated value of your home, and the potential cost that the lender could incur if you "outlive" the value of your home. As discussed in our previous reverse mortgage letter, once you obtain a reverse mortgage you will never have to make another payment on your home as long as you live in your home. This includes a situation where you are receiving monthly payments, and the value of your home is not there to support the payments. You will still be paid every single month. For this reason mortgage insurance is more costly on a reverse mortgage.

Appraisals

The current and future value of your home is one of the main factors in determining both your qualification for a reverse mortgage, and the amount of equity you can utilize.  Since the income you receive from a reverse mortgage is based on your current and future equity, it is necessary to obtain an appraisal to value your home.  The value of your home is based upon recent sales of similar homes in your area. 

Who Holds Title to the Property? 

A common myth is that when you obtain a reverse mortgage you no longer hold title to your property. This is absolutely not true. You hold title to your home just as you would on a regular "forward" mortgage.

 

We hope you find our future reverse mortgage posts informative as well. Stay tuned.

If you have additional questions or need immediate assistance, feel free to call Steve Kappre on his cell phone at 856-419-3561.

 

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

Last time, we learned about who can qualify for a reverse mortgage (see Reverse Mortgages - Part 1).  This time we are going to discuss payment options and how much money someone can get with a reverse mortgage.

~ You will never have to make another mortgage payment ~

Payment Options

When you finance your home with a reverse mortgage, as a borrower you will never have to make a mortgage payment while you live in your home. You will of course be required to pay your taxes and home owner's insurance.

There are several ways to receive the equity in your home through a reverse mortgage. You can ...

1. Receive a lump sum after your new reverse mortgage has funded,
2. Receive a monthly payment from the mortgage company, or
   
3. Create a mix of the two above options, such as; receive a $5,000 lump sum after the loan funds, and use the rest of your equity to receive monthly payments from the mortgage company.

In the event were there isn't enough equity in a home to receive monthly payments or a lump sum, it is possible to finance (or refinance) the home simply so that a monthly payment will not have to be made. This alone can relieve a huge burden from a senior who is making payments from Social Security income or their pension. (We will talk about other income in a future article).

How much money you receive is determined by several factors;

1. Your age at the time you choose a reverse mortgage,
2. The amount of equity in your home,
3. The value of your home, and finally
4. Interest rates at the time.

Other factors could include what type of Reverse Mortgage you choose.  The choice is often obvious when comparing your options. 

We hope you find our future reverse mortgage posts informative as well. Stay tuned.

If you have additional questions or need immediate assistance, feel free to call Steve Kappre on his cell phone at 856-419-3561.

 

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

There are many general questions that arise regarding reverse mortgages. Some questions have to do with the safety and prudence of a reverse mortgage. Other questions may be about your current income, or credit. Seniors and their families need help understanding if a reverse mortgage is the best loan for a particular situation. Over the next few days I am going to answer some of the common questions regarding reverse mortgages. Feel free to post your questions below or contact me directly.

 

Who is eligible for a reverse mortgage?

There is little criteria in qualifying for a reverse mortgage since there are no credit requirements and there are no employment or income requirements. Here are the two main factors regarding eligibility for a reverse mortgage

1. You must be at least 62 years of age to qualify for a reverse mortgage. If you are married, than your spouse will also have to be 62 years of age (or older). 
2. If you already own a home and would like a reverse mortgage (considered a refinance), you must have equity in your home. You may qualify if you have a mortgage currently on your home.

 AS OF JANUARY 1, 2009, YOU MAY PURCHASE A HOME USING A REVERSE MORTGAGE. In this case, you would have to have the available savings to satisfy the down payment needed. These savings, for example, could be your personal savings, proceeds from the sale of a home, or a retirement account that you can withdraw from.

The most popular type of reverse mortgage is known as the HECM, or the Home Equity Conversion Mortgage. This is an FHA loan, which you may know is a government loan. Although this is an FHA loan, there are many differences between an FHA reverse mortgage loan (HECM) and a traditional FHA loan.

Stay tuned for more information regarding a reverse mortgage.

If you need immediate assistance regarding a reverse mortgage, please feel free to contact our office at 856-415-7720 and ask for Steve Kappre, the Reverse Mortgage Specialist.

 

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

 

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com