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Get the Facts About Reverse Mortgages
By Philip Burum
1957 was the year when singer Sam Cooke introduced the world to Soul Music with ‘You Send Me’, Russia launched the first successful satellite ‘Sputnik’ and half of the ten most popular television programs were westerns. Today, Americans born that year are beginning to consider their options for retirement and because today’s retirees are living longer, healthier and more active lives; many want to remain in their homes after retirement. For them the Federal Housing Administration (FHA) has developed the Home Equity Conversion Mortgage (HECM) popularly known as a ‘Reverse Mortgage’ to enable homeowners a financially viable option for ‘aging in place.’
Most have likely heard some form of advertisement regarding reverse mortgages but, with all due respect to Tom Selleck, Robert Wagner, and the host of others that have been spokesmen for the reverse mortgage industry, in most cases the services being advertised for are not necessary for a homeowner to take advantage of this government-initiated program.
As with the initial home purchase and financing process, because the home is the biggest and best investment most Americans will make in their lifetime, considering a Reverse Mortgage will require research. Rather than calling the company that is paying our favorite Blue Blood, individuals should start their research by visiting the National Council on Aging (NCOA) www.NCOA.org website. The site contains a plethora of information to assist seniors with everything from healthy living to financial planning. Locate the tab for economic security and download their free booklet, Use Your Home to Stay at Home, then visit www.reversemortgage.org for additional resources. You may decide to inquire further with one of the advertised services but the best place to start information gathering is directly from the source.
Once you decide if a Reverse Mortgage is right for you, your next step will be to visit www.HUD.gov to locate an FHA-approved lender and to contact an HECM counselor for a listing. Services rendered by HECM counselors are free or at a low cost. To locate a HECM counselor, search the website site for the HECM Counselor Roster, the National HECM Counseling Network or call (800) 569-4287 toll-free for the name and location of a HUD-approved housing counseling agency near you.
HECMs enable qualified homeowners to withdraw some of the equity their homes have built up over the years. These can supplement income or Social Security, meet unexpected medical expenses, make home improvements (especially those required for ‘aging-in-place’), and more by converting a portion of the equity in their home into cash. HECM borrowers do not have to repay the HECM loan until they no longer use the home as their principal residence or fail to meet the obligations of the mortgage.
To be eligible for an FHA Reverse Mortgage, the FHA requires a homeowner to be 62 years of age or older, own their home outright or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan. They must also have the financial resources to pay ongoing property charges including taxes and insurance, real estate taxes, utilities and hazard and flood insurance premiums. The borrower must live in the home if it is a single-family home or if it is a two- to four-unit home and one unit must be occupied by the borrower.
HECMs have no monthly principal or interest payments. With HECMs, when the home is sold or no longer used as a primary residence, the cash, interest and other finance charges must be repaid. All proceeds beyond the amount owed belong to the mortgagee’s spouse or estate. This means any remaining equity can be transferred to heirs. No debt is passed along to the estate or heirs.
For many Americans, equity in a home represents the majority a retiree’s nest egg. The advent of the reverse mortgage provides an opportunity for our senior community to benefit from years of stewardship of the greatest of American investments. Whether you need to do some remodeling or take a long deserved and much needed vacation, consider taking advantage of this program and enjoying your retirement.
The BIA Baldy View Chapter seeks to advance the opportunity to attain the American Dream of home ownership. For additional information on homebuying, home improvements or the benefits of homeownership, go to www.biabuild.com on the web.