By Owen Coyle, Market Mortgage
MISCONCEPTION #1: “IT’S TOO GOOD TO BE TRUE”.
THE TRUTH: The money is provided by Fannie Mae and is federally insured by the U.S. Federal Government (FHA). This program is made available from HUD-approved lending institutions. This “Government Insured Program” is 100% safe!!!
MISCONCEPTION #2: “THE LENDER OR GOVERNMENT WILL TAKE MY HOME”
AFTER I DIE”
THE TRUTH: The homeowner remains the owner of the home, title does not change. After the homeowner dies, the home goes to the heirs. The title and the responsibilities of home ownership stay with the homeowners; they must pay the property taxes and homeowners insurance and take reasonable steps to maintain their property.
MISCONCEPTION #3: “I CAN OWE MORE THAN MY HOME IS WORTH”.
THE TRUTH: The homeowner or their heirs can never owe more than the value of the home. Even if you live to be 100, and when you move out, sell your home or pass away, the real estate market is at an all time low, you still cannot owe more than the value of the home. Bankers call this a “non-recourse loan”, meaning that your Reverse Mortgage can never leave your heirs in debt.
MISCONCEPTION #4: “I CAN BE FORCED TO MOVE OUT OF MY HOME”.
THE TRUTH: The homeowner can stay in their home “FOREVER”.
MISCONCEPTION #5: “MY CHILDREN WILL OBJECT TO REVERSE MORTGAGE”.
THE TRUTH: Experience shows that the children are strongly in favor of their parents getting a Reverse Mortgage and enjoying all the benefits it creates. It is a reward for many years of home ownership. The children of every one of my clients were 100% in favor or the Reverse Mortgage.
MISCONCEPTION #6: “IF I HAVE AN EXISTING MORTGAGE, I CAN’T GET
A REVERSE MORTGAGE”.
THE TRUTH: The existing mortgage is paid off with the available Reverse Mortgage funds.
Showing posts with label FAQ. Show all posts
Showing posts with label FAQ. Show all posts
Thursday, February 19, 2009
Reverse Mortgage True or False
1. If I get a reverse mortgage, that means the bank holds title to my home. - False.
Title does not get transferred into the bank’s name. Throughout the life of the loan, you own your home.
2. Even though I have done my research on reverse mortgages and fully understand the product, I still have to obtain reverse mortgage counseling. - True.
All programs require independent, third party counseling by an approved entity, which includes HUD, Fannie Mae or Financial Freedom for the Cash Account product.
3. I am not allowed to hold title in my trust. - False.
The lending institutions will allow you to hold title in your trust as long as you meet all of the lender’s and/or HUD’s guidelines.
4. If I decide to sell my home, the bank will make me payback the loan and will collect a portion of the appreciation. - False.
The lender will only collect the amount that is due to them.If the loan balance is larger than the home value, the lender will only collect the proceeds from the sale. You can never owe more than what your home is worth.
5. If I don’t want to pay my taxes and insurance,the lender can set aside a portion of the loan funds and pay them for me. - True.
If you would like to impound the taxes and insurance, depending upon the lender, they can arrange that for you.
6. I must have good credit to qualify for a reverse mortgage. - False.
The lender will run a credit report for tax and federal liens.All recorded liens must be paid off and property taxes must be paid current at the time of closing so the lender can take first position.
7. My house must be in prime condition if I am to be considered for a reverse mortgage. - False.
The lender requires that the home meet certain guidelines. If you are considering a Home Equity Conversion Mortgage, it must also meet HUD’s requirements. You may also qualify for a repair set-aside if work needs to be done on your home. Check with your lender for more information.
8. I am allowed to change my payment plan after the close of escrow. - True.
You may contact the servicing department and make arrangements to change your plan for a small fee.*
9. The only homeowners that get a reverse mortgage are seniors who can’t afford to make their monthly mortgage payments. - False.
We have found that seniors will use the money to go on vacation,buy a new car, remodel their home, pay for their grandchildren’s education, buy another home, or just to feel secure in their golden years.
10. The older I am, the more money I can get from a reverse mortgage. - True.
A senior that is 80 may receive more money than a 62 year old senior. The loan amount is based off of age, home value, and life expectancy.
*For TX, please make sure to check with your lender on current options available.
Title does not get transferred into the bank’s name. Throughout the life of the loan, you own your home.
2. Even though I have done my research on reverse mortgages and fully understand the product, I still have to obtain reverse mortgage counseling. - True.
All programs require independent, third party counseling by an approved entity, which includes HUD, Fannie Mae or Financial Freedom for the Cash Account product.
3. I am not allowed to hold title in my trust. - False.
The lending institutions will allow you to hold title in your trust as long as you meet all of the lender’s and/or HUD’s guidelines.
4. If I decide to sell my home, the bank will make me payback the loan and will collect a portion of the appreciation. - False.
The lender will only collect the amount that is due to them.If the loan balance is larger than the home value, the lender will only collect the proceeds from the sale. You can never owe more than what your home is worth.
5. If I don’t want to pay my taxes and insurance,the lender can set aside a portion of the loan funds and pay them for me. - True.
If you would like to impound the taxes and insurance, depending upon the lender, they can arrange that for you.
6. I must have good credit to qualify for a reverse mortgage. - False.
The lender will run a credit report for tax and federal liens.All recorded liens must be paid off and property taxes must be paid current at the time of closing so the lender can take first position.
7. My house must be in prime condition if I am to be considered for a reverse mortgage. - False.
The lender requires that the home meet certain guidelines. If you are considering a Home Equity Conversion Mortgage, it must also meet HUD’s requirements. You may also qualify for a repair set-aside if work needs to be done on your home. Check with your lender for more information.
8. I am allowed to change my payment plan after the close of escrow. - True.
You may contact the servicing department and make arrangements to change your plan for a small fee.*
9. The only homeowners that get a reverse mortgage are seniors who can’t afford to make their monthly mortgage payments. - False.
We have found that seniors will use the money to go on vacation,buy a new car, remodel their home, pay for their grandchildren’s education, buy another home, or just to feel secure in their golden years.
10. The older I am, the more money I can get from a reverse mortgage. - True.
A senior that is 80 may receive more money than a 62 year old senior. The loan amount is based off of age, home value, and life expectancy.
*For TX, please make sure to check with your lender on current options available.
FAQ for Children and Heirs
1. Will Mom and Dad use up my inheritance?
While tapping into their equity, your parents’ home may be appreciating in value,which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.
2. Will the bank take their home?
No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.
3. How much money will they owe when the loan has to be repaid?
Your parents will owe the total amount borrowed, accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the loan amount.
4. When do my parents repay the loan?
There are three viable options for your parents. They can sell their home to repay the lender and collect the proceeds, choose to reimburse the lender directly from a personal account, or refinance the loan.
5. What happens to the equity if my parents or I decide to repay the loan by selling the house?
There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaininge quity is retained by the owners or heirs.
6. What happens to my mom and dad’s house if they move into a senior care facility?
A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.
7. What happens if the loan balance becomes greater than the value of the home?
The Home Equity Conversion Mortgage (HECM) is a non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.
8. What are the risks my parents would be taking in receiving a reverse mortgage?
A reverse mortgage doesn’t affect regular Social Security or Medicare benefits.To find out if it impacts other federal or state assistance or medical programs,contact your reverse mortgage lender, tax attorney, or counseling agency.
9. Are there restrictions on how my parents spend their money?
Your parents can spend their money any way they want. Borrowers have used reverse mortgages to pay for grandchildren’s educations, vacations,new cars, home improvements or to eliminate debts. The money can be used forany thing they desire.
10. Is there any information that provides what all of the fees will be?
The lender is required to provide your parents with the Total Annual Loan Cost, or “TALC” disclosure, which is required by the Federal Reserve Board.The TALC displays the total transaction costs over the projected life of the loan,which will allow your parents to see all costs related to the reverse mortgage.
While tapping into their equity, your parents’ home may be appreciating in value,which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.
2. Will the bank take their home?
No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.
3. How much money will they owe when the loan has to be repaid?
Your parents will owe the total amount borrowed, accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the loan amount.
4. When do my parents repay the loan?
There are three viable options for your parents. They can sell their home to repay the lender and collect the proceeds, choose to reimburse the lender directly from a personal account, or refinance the loan.
5. What happens to the equity if my parents or I decide to repay the loan by selling the house?
There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaininge quity is retained by the owners or heirs.
6. What happens to my mom and dad’s house if they move into a senior care facility?
A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.
7. What happens if the loan balance becomes greater than the value of the home?
The Home Equity Conversion Mortgage (HECM) is a non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.
8. What are the risks my parents would be taking in receiving a reverse mortgage?
A reverse mortgage doesn’t affect regular Social Security or Medicare benefits.To find out if it impacts other federal or state assistance or medical programs,contact your reverse mortgage lender, tax attorney, or counseling agency.
9. Are there restrictions on how my parents spend their money?
Your parents can spend their money any way they want. Borrowers have used reverse mortgages to pay for grandchildren’s educations, vacations,new cars, home improvements or to eliminate debts. The money can be used forany thing they desire.
10. Is there any information that provides what all of the fees will be?
The lender is required to provide your parents with the Total Annual Loan Cost, or “TALC” disclosure, which is required by the Federal Reserve Board.The TALC displays the total transaction costs over the projected life of the loan,which will allow your parents to see all costs related to the reverse mortgage.
Thursday, January 29, 2009
Reverse Mortgage FAQ
1. How do I qualify for a reverse mortgage?
To become eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence.
2. How much money can I get?
The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your house is worth, the total amount of liens, and interest rates. The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.
3. How do I receive my money?
There are several different options to choose from. You can take the money in a lump sum, set up a line of credit, monthly payment, or a combination of all three.
4. What costs are associated with a reverse mortgage?
The costs of a “forward” loan are very similar to a reverse loan. For example, an origination fee is paid to the broker/lender, a MIP (mortgage insurance premium) is paid to HUD on the Home Equity Conversion Mortgage (HECM), an appraisal fee, a flood certification fee, a doc prep fee, title and settlement fees, and other standard closing costs.
5. Is it required that I receive counseling before getting a reverse mortgage?
Yes. Counseling is required to protect borrowers from receiving incorrect information about reverse mortgages. The lender must be in receipt of the counseling certificate before they can close the loan. To locate a reverse mortgage counselor near you, contact your loan officer or your local HUD office.
6. Do I get taxed on the money I receive from my reverse mortgage?
The equity in your home is considered your money and not additional income. All the funds from a reverse mortgage are tax free.
7. Do I have to pay any fees to the reverse mortgage lender during the course of my loan?
A reverse mortgage was created so borrowers don’t have to pay fees during the course of the loan. However, there is a monthly servicing fee that is associated with reverse mortgages. For more information on the service set-aside, please talk to your loan officer.
8. Am I responsible for paying my homeowner’s insurance and property taxes?
Property taxes and homeowner’s insurance must be paid current at all times. If you choose, and if loan proceeds are available, the lender can impound your taxes and insurance and pay them for you when they become due.
9. Does my house have to be in prime condition in order for me to receive a reverse mortgage?
An appraiser will appraise the house following FHA guidelines or the lender’s guidelines depending uponthe reverse mortgage program. If the house needs to be repaired, the lender may require you to fix it prior to closing. A repair set-aside may be issued if they allow you to repair the home after closing.
10. What is a repair set aside?
If repair work is done after the close of escrow, the lender will hold 1 and 1/2 times the amount of money it costs to repair the item. Once the work has been completed, a final bill will be submitted to the lender, and they will disburse payments to the appropriate parties.
11. Am I limited as to how I can use the money I receive from a reverse mortgage?
You can use your money however you like. Borrowers have used a reverse mortgage for vacations, home modifications, healthcare, education for grandchildren, new cars and to supplement retirement income. It’s your money to do as you wish.
12. Does the bank hold title to my house while my reverse mortgage is outstanding?
No. The person receiving the reverse mortgage must be on title during the course of the loan.
13. How is the interest rate determined on the reverse mortgage?
For the Home Equity Conversion Mortgage (HECM), the interest rate is adjusted either monthly or annually based on an index called the “1-year U.S. Treasury Constant Maturity Rate.” It changes weekly.
For monthly adjusting HECMs, the interest rate charged for the next month is equal to the current 1-year U.S. Treasury rate plus a margin.
For the annually adjusting HECMs, the interest rate charged for the next year is equal to the current 1-year U.S. Treasury rate plus 3.1%.
For the “Homekeeper,” the interest rate charged is equal to the Initial Rate Index 1-Month CD plus 3.4% margin.
For other products in the market, please check with your loan officer.
14. If my spouse isn’t 62, will they remain on title?
All parties on title must be at least 62 in order to receive a reverse mortgage. If you are considering removing someone from title to obtain a reverse mortgage, please seek legal counsel and a tax consultant regarding your particular scenario.
15. Does a non-borrowing spouse need to sign any documents?
Yes. A non-borrowing spouse must sign a Non-Borrowing Spouse (NBS) Certification, Notice of Right to Cancel, Riders (if necessary), Truth in Lending, the HUD, and the deed(s) of Trust. If there is a trust on the property, additional signatures may be required.
16. Who do I contact to get a reverse mortgage?
Call or E-mail Owen Coyle
Reverse Mortgage Consulting
(800) 830-2505
(760) 484-6660
owen.coyle@gmail.com
or visit Owen's Website
http://www.reversemortgages62.com/
To become eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence.
2. How much money can I get?
The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your house is worth, the total amount of liens, and interest rates. The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.
3. How do I receive my money?
There are several different options to choose from. You can take the money in a lump sum, set up a line of credit, monthly payment, or a combination of all three.
4. What costs are associated with a reverse mortgage?
The costs of a “forward” loan are very similar to a reverse loan. For example, an origination fee is paid to the broker/lender, a MIP (mortgage insurance premium) is paid to HUD on the Home Equity Conversion Mortgage (HECM), an appraisal fee, a flood certification fee, a doc prep fee, title and settlement fees, and other standard closing costs.
5. Is it required that I receive counseling before getting a reverse mortgage?
Yes. Counseling is required to protect borrowers from receiving incorrect information about reverse mortgages. The lender must be in receipt of the counseling certificate before they can close the loan. To locate a reverse mortgage counselor near you, contact your loan officer or your local HUD office.
6. Do I get taxed on the money I receive from my reverse mortgage?
The equity in your home is considered your money and not additional income. All the funds from a reverse mortgage are tax free.
7. Do I have to pay any fees to the reverse mortgage lender during the course of my loan?
A reverse mortgage was created so borrowers don’t have to pay fees during the course of the loan. However, there is a monthly servicing fee that is associated with reverse mortgages. For more information on the service set-aside, please talk to your loan officer.
8. Am I responsible for paying my homeowner’s insurance and property taxes?
Property taxes and homeowner’s insurance must be paid current at all times. If you choose, and if loan proceeds are available, the lender can impound your taxes and insurance and pay them for you when they become due.
9. Does my house have to be in prime condition in order for me to receive a reverse mortgage?
An appraiser will appraise the house following FHA guidelines or the lender’s guidelines depending uponthe reverse mortgage program. If the house needs to be repaired, the lender may require you to fix it prior to closing. A repair set-aside may be issued if they allow you to repair the home after closing.
10. What is a repair set aside?
If repair work is done after the close of escrow, the lender will hold 1 and 1/2 times the amount of money it costs to repair the item. Once the work has been completed, a final bill will be submitted to the lender, and they will disburse payments to the appropriate parties.
11. Am I limited as to how I can use the money I receive from a reverse mortgage?
You can use your money however you like. Borrowers have used a reverse mortgage for vacations, home modifications, healthcare, education for grandchildren, new cars and to supplement retirement income. It’s your money to do as you wish.
12. Does the bank hold title to my house while my reverse mortgage is outstanding?
No. The person receiving the reverse mortgage must be on title during the course of the loan.
13. How is the interest rate determined on the reverse mortgage?
For the Home Equity Conversion Mortgage (HECM), the interest rate is adjusted either monthly or annually based on an index called the “1-year U.S. Treasury Constant Maturity Rate.” It changes weekly.
For monthly adjusting HECMs, the interest rate charged for the next month is equal to the current 1-year U.S. Treasury rate plus a margin.
For the annually adjusting HECMs, the interest rate charged for the next year is equal to the current 1-year U.S. Treasury rate plus 3.1%.
For the “Homekeeper,” the interest rate charged is equal to the Initial Rate Index 1-Month CD plus 3.4% margin.
For other products in the market, please check with your loan officer.
14. If my spouse isn’t 62, will they remain on title?
All parties on title must be at least 62 in order to receive a reverse mortgage. If you are considering removing someone from title to obtain a reverse mortgage, please seek legal counsel and a tax consultant regarding your particular scenario.
15. Does a non-borrowing spouse need to sign any documents?
Yes. A non-borrowing spouse must sign a Non-Borrowing Spouse (NBS) Certification, Notice of Right to Cancel, Riders (if necessary), Truth in Lending, the HUD, and the deed(s) of Trust. If there is a trust on the property, additional signatures may be required.
16. Who do I contact to get a reverse mortgage?
Call or E-mail Owen Coyle
Reverse Mortgage Consulting
(800) 830-2505
(760) 484-6660
owen.coyle@gmail.com
or visit Owen's Website
http://www.reversemortgages62.com/
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