Reverse Mortgage Information
A reverse mortgage releases the equity in the home in a single payment. A senior reverse mortgage is usually reserved for seniors over the age of 62. The homeowner is not obligated to repay the loan until the owner’s death. At that time, the lender will assume the title of the property as repayment. The owner may also choose to leave or sell the property also. The homeowner may be out of the home for up to 364 consecutive days and the reverse mortgage will still be effective.
The reverse mortgage differs from the conventional mortgages in several ways. A reverse mortgage requires no payments throughout the duration of the loan. All the interest is added to the lien on the property. If the owner receives monthly payments from the equity in the home, the debt on property increases each month. In a conventional mortgage, the homeowner is obligated to make a monthly payment to the lender. Any equity in the property may only be obtained through a second mortgage or home equity loan.
If the property increases in value after a mortgage, clients may obtain a second or third reverse mortgage
based upon the increased value of the home or the increased equity in the home. Most lenders are reticent about approving a second or third lien on a property, because the balance increases over time. Banks must ensure the client will have the funds to pay the loan after their death. This option, however, is an available option for some clients.
Lenders may allow refinancing of a reverse mortgage if enough equity is present in the home. If interest rates are reduced, then some people may qualify for a streamline refinance rate.
Clients must also be aware that when a reverse mortgage is obtained, the amount of money recorded on the loan is higher than the dollar amount actually dispersed. The amount is often misconstrued by buyers as the amount owed on the mortgage. In actuality, the amount is the maximum lending amount given the equity in the home at the time of the mortgage. The required payout is calculated based on the amount dispersed.
Florida Reverse Mortgage and Reverse Mortgages in California
A Florida reverse mortgage is the same as any mortgage anywhere. There are not any credit requirements, income requirements or health requirements associated with a reverse mortgage in Florida. In most instances, the borrower is the homeowner and is of 62 years of age or older. The reverse mortgage is also in conjunction with HUD’s Federal Housing Administration (FHA) as well. The borrower may not owe more on the home than the home is worth. The lender may not seek recourse on the loan through other assets, income or estate.
Best Reverse Mortgages
Reverse mortgages are not popular in United States. In February of 2011, lenders expected the program to expand, but the program did not. Specifically, they expected the FHA Saver reverse mortgage to gain momentum because of its 0.1 percent mortgage insurance premium rather than the 2.0 percent required with regular FHA-insured reverse mortgage products.
This year, HUD has approved over 6900 standard reverse mortgages. This percentage is down from last year. Only 296 FHA Saver loans were approved by HUD as of January 2011.
Reverse Mortgage Wholesale Lender
Experts have found that the senior market represents $4.3 trillion of the home equity available, according to ReverseMortgageWholesale.com. Currently, lenders have only capitalized on 2% of this market share. Because seniors do not have to make monthly payments to receive access to the funds, reverse mortgages are a win-win situation for all.
Clients that decide to obtain a reverse mortgage should keep in mind that reverse mortgages are supported by government funding. The fees and rates are regulated by government entities. Before obtaining a reverse mortgage, ensure that lenders provide full disclosure and a good faith estimate. All fees and costs should be discussed.
Clients should shop around to various lenders to find the best deal available. The reverse mortgage calculator can help someone determine how much cash they would qualify for. Providing accurate information to the lender will ensure that a valid estimate of the amount available will be provided.
Reverse Mortgage Stimulus
Congress recently signed in the reverse mortgage stimulus into effect to help downsizing seniors. They can conserve cash and not have any payments for the rest of their lives. Single family homes, condos, PUDs and other loans are all available. No origination fee and no monthly service fees are required.
Fannie Mae “Homekeeper” Reverse Mortgage is another type of mortgage that is similar to other FHA/HUD monthly programs. The limit on the “Homekeeper” mortgage is $417,000, but clients rarely select this option because the FHA currently has a $625,000 limit. The interest rate is typically 4.5% about the “One Month Certificate of Deposit Index.”
Will I Be Able to Pass on My property to My Heirs?
Clients that do a reverse mortgage may sell the property, pay off the property with life insurance or will it to a surviving family member. The survivor may then refinance the remainder of the mortgage into a regular mortgage and pay the balance due on the home. Heirs may also have access to any equity remaining in the property. If the person dies with no heirs, the lender will accept the title of the property as payment in full until the time of death.
Reverse Mortgages and Property Taxes
Clients that obtain reverse mortgages will be required to pay property taxes annually. Other than property taxes, seniors receive their property tax free. The reverse mortgage actually pays the client to remain in the property until their time of death. There is not cap on the age that a person may live with a reverse mortgage. Principal reductions are also allowed if the senior client decides to take advantage of the property.
How are Interest Rates Calculated?
Interest rates are calculated by the government. An initial rate will be set at the time of closing of the reverse mortgage loan. Some reverse mortgages have variable or adjustable interest rates that adjust according to the market conditions and other reverse mortgages are fixed rate for clients that desire predictability.