There is a lot of buzz about reverse mortgages lately. Even popular actors are on commercials touting their benefits.
“Get cash and stay in your home.” “Never pay a monthly payment.” This just sounds too good to be true, doesn’t it?
In fact, while a reverse mortgage is not the right solution for everyone, it is indeed the best solution for many. You really
can get cash from the equity in your home, stay in your home and never have a monthly payment. FHA reverse
mortgages are federally insured. To be eligible for the program you must be at least 62 years of age, have a low
mortgage balance, and live in the home as a primary residence. The approval of the loan is based on these factors as
well as the value of the property. Neither credit scores nor income is used for qualification.
Ok, you are probably asking yourself right now, "so what is the catch"? There is no catch. It is a federal program
designed to help seniors. Let's directly address some of the most often asked questions or concerns regarding reverse
mortgages.
Do reverse mortgages have high fees?
The US government regulates the fee charged on a reverse mortgage; therefore, the broker’s fees are capped. All loans,
including reverse mortgages do have other fees such as taxes and title insurance. Reverse mortgages have mortgage
insurance fees. While this does add to the overall cost of the loan the insurance is there to protect the homeowner. If the
home’s value goes down below how much is owed on the loan, the borrower and all heirs to the property are covered by
the insurance. No one will have to pay for the difference. So, the bottom line is yes; the fees are higher than a traditional
loan. However, the better question to ask is… is it a good value? In most cases, the answer is YES. The money you
receive from a reverse mortgage can greatly impact your life in a positive way.
For example, if you can no longer afford to stay in your home during your retirement years, a reverse mortgage may help.
Or, if you need home health care but, it is not in your budget then a reverse mortgage may be just what you need. If your
home requires repairs but you don’t have enough in the bank, the cash from a reverse mortgage could make a
difference. And if leaving your home to family is not part of your plan then you may want to use the additional cash to live
your own life to its fullest.
Is it better to take a home equity line instead of a reverse mortgage?
Maybe. If you can qualify for a home equity line it should be considered. The main disadvantage of a traditional equity
line is you will have monthly payments. With a reverse mortgage there are no payments.
What types of homes qualify?
Single family homes and FHA approved condos.
What if there is an existing mortgage?
You would pay off the existing mortgage with the reverse mortgage and then have access to the balance.
Are social security/medicare benefits affected?
Generally no, as the money received from a reverse mortgage is not considered income.
Is it a good idea to tap in to the equity in your home?
The answer to this depends on your circumstances. This should be discussed with your family, financial advisor and
your reverse mortgage consultant in greater detail.
As always, it is important you conduct business with a trusted person who works with a reputable company. Get
references from the reverse mortgage consultant. If he or she tries to sell you anything in addition to the mortgage (such
as long -term health care insurance or annuities), do not continue doing business with that person, as they may have
conflicts of interest. Your reverse mortgage consultant should patiently answer all your questions and be only concerned
with helping you decide if a reverse mortgage is the best solution for you.
Robin J Schwartz is a licensed mortgage broker who specializes in reverse mortgages. In addition, she contributes to
the South Florida community through her involvement with several non-profit organizations such as the Young Founders
of Mt Sinai Hospital, The Aqua Foundation for Women and is currently serving on a Mayor’s committee for the city of
Miami Beach. Robin can be contacted at robin@robinjschwartz.com.
_____________________
For more information about reverse mortgages, check out the following government resources on the subject.
“Get cash and stay in your home.” “Never pay a monthly payment.” This just sounds too good to be true, doesn’t it?
In fact, while a reverse mortgage is not the right solution for everyone, it is indeed the best solution for many. You really
can get cash from the equity in your home, stay in your home and never have a monthly payment. FHA reverse
mortgages are federally insured. To be eligible for the program you must be at least 62 years of age, have a low
mortgage balance, and live in the home as a primary residence. The approval of the loan is based on these factors as
well as the value of the property. Neither credit scores nor income is used for qualification.
Ok, you are probably asking yourself right now, "so what is the catch"? There is no catch. It is a federal program
designed to help seniors. Let's directly address some of the most often asked questions or concerns regarding reverse
mortgages.
Do reverse mortgages have high fees?
The US government regulates the fee charged on a reverse mortgage; therefore, the broker’s fees are capped. All loans,
including reverse mortgages do have other fees such as taxes and title insurance. Reverse mortgages have mortgage
insurance fees. While this does add to the overall cost of the loan the insurance is there to protect the homeowner. If the
home’s value goes down below how much is owed on the loan, the borrower and all heirs to the property are covered by
the insurance. No one will have to pay for the difference. So, the bottom line is yes; the fees are higher than a traditional
loan. However, the better question to ask is… is it a good value? In most cases, the answer is YES. The money you
receive from a reverse mortgage can greatly impact your life in a positive way.
For example, if you can no longer afford to stay in your home during your retirement years, a reverse mortgage may help.
Or, if you need home health care but, it is not in your budget then a reverse mortgage may be just what you need. If your
home requires repairs but you don’t have enough in the bank, the cash from a reverse mortgage could make a
difference. And if leaving your home to family is not part of your plan then you may want to use the additional cash to live
your own life to its fullest.
Is it better to take a home equity line instead of a reverse mortgage?
Maybe. If you can qualify for a home equity line it should be considered. The main disadvantage of a traditional equity
line is you will have monthly payments. With a reverse mortgage there are no payments.
What types of homes qualify?
Single family homes and FHA approved condos.
What if there is an existing mortgage?
You would pay off the existing mortgage with the reverse mortgage and then have access to the balance.
Are social security/medicare benefits affected?
Generally no, as the money received from a reverse mortgage is not considered income.
Is it a good idea to tap in to the equity in your home?
The answer to this depends on your circumstances. This should be discussed with your family, financial advisor and
your reverse mortgage consultant in greater detail.
As always, it is important you conduct business with a trusted person who works with a reputable company. Get
references from the reverse mortgage consultant. If he or she tries to sell you anything in addition to the mortgage (such
as long -term health care insurance or annuities), do not continue doing business with that person, as they may have
conflicts of interest. Your reverse mortgage consultant should patiently answer all your questions and be only concerned
with helping you decide if a reverse mortgage is the best solution for you.
Robin J Schwartz is a licensed mortgage broker who specializes in reverse mortgages. In addition, she contributes to
the South Florida community through her involvement with several non-profit organizations such as the Young Founders
of Mt Sinai Hospital, The Aqua Foundation for Women and is currently serving on a Mayor’s committee for the city of
Miami Beach. Robin can be contacted at robin@robinjschwartz.com.
_____________________
For more information about reverse mortgages, check out the following government resources on the subject.
Reverse Mortgages: Too Good to Be True?
by Robin J. Schwartz, Mortgage Broker (Guest Columnist)
by Robin J. Schwartz, Mortgage Broker (Guest Columnist)
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