When the program was first introduced to the public, it was designed to provide seniors with money from the equity in their homes, but after ten years, the home became the property of the bank. That’s when the Federal Government stepped in and took over the program to build safety nets for seniors.
The first change was that the older person would not have to leave the home until they stopped living in the home as their main home. Which means they either sold the house or passed away, and title to the house was never transferred to the bank. This loan is like any other loan in that there is a lien on the property.
The Federal Government issues mortgage insurance to protect the elderly from a multitude of problems that should relieve any fear of receiving a Reverse Mortgage. The purpose of mortgage insurance is to insure a number of important issues listed below.
one. Protects against default by the Mortgage Company and/or bank in the event they go out of business or declare bankruptcy.
2. It protects the elderly in the sense that they will always remain in the home as long as the home remains their primary residence or they die.
3. Protects that, should the loan come due and payable, the loan balance will never exceed the value of the home, should the home’s value decline at the time of sale. Therefore, the heirs will never have to pay additional money to release the estate. The Reverse Mortgage is a Non-Recourse Loan, the definition is A non-recourse loan means that the lender only has your property as collateral for your loan; he has no other way to get the principal and interest repaid if something happens and his house isn’t worth enough to pay the obligation, including all interest and fees.
Four. A reverse mortgage does not test the senior’s credit, income, or assets. However, if the senior has an unresolved bankruptcy, he may create a problem that will need to be resolved. Also, any tax liens or judgments that affect the title of the property will have to be settled with the proceeds.
5. One of the biggest problems that seniors have had in the past is that the cost of the loan was high in the past.
has. Origination fees in the past were calculated as 2% of the appraised value no matter how much the value came in too.
b. Today costs are drastically reduced to benefit seniors, calculated as 2% of the first $200,000 and then 1% of every hundred up to a maximum of $6,000 no matter how much it is worth.
6. The biggest change to date has to do with the value and amount of money available to seniors.
has. In the past, the value and quantity available were determined by county lines. In many cases, the amount that was available was so low that in some cases they would have to bring money to the closing just to close the loan. Additionally, with higher value homes above the value set by the county limit, the senior was unable to receive enough money to satisfy existing mortgage balances. Or they would have shares that were just sitting there and they couldn’t access this money. The national average before the change was $232,000.
b. Today, the program is available to many more seniors who have turned down HECM mortgages due to limits in the past. In the past, if they were worth over the limits, if they still wanted a reverse mortgage, they had to go to a giant product that wasn’t FHA insured and was more expensive and gave less money to appraise. This program has almost disappeared today.
against Today, with the government insured reverse mortgage, the limits are now $417,000 and they are considering raising them in the future.
It is important that a senior considering a HECM loan is educated by an experienced specialist who can explain the program in detail and reveal the positive and negative aspects of the program. The fact is that the Reverse Mortgage is a phenomenal program to help you live a better life and stay in your home. But it’s not for everyone, older people need to be educated people and determine certain issues in their own situation and decide if it is in fact right for them.
The program to date remains the most underutilized program in the mortgage field; some of this has been due to unfavorable media attention or simply explained in the wrong context. A Reverse Mortgage is not a bad program; it can have life-changing effects on seniors today. With the ever-changing crisis in this country, with seniors losing their life savings or deciding how they are going to eat, pay taxes, or even be able to stay home when they get sick, the program saves them from this disaster.
Many more changes are coming that will also help many seniors who are considering selling their homes due to the fact that they do not need large houses that are difficult to maintain. The newest program being implemented is the ability to buy a home with a reverse mortgage and have no mortgage payments for the rest of their lives. This program will help many seniors who have a large home or who have been renting simply because they couldn’t qualify for a mortgage.
The Reverse Purchase Mortgage is basically the same as the traditional one, but it is used to buy a home. It can be used as a tool against taxes in many cases. Under capital gains tax laws, a couple who sell their home and realize a gain of up to $500,000 is determined to be tax free. The problem comes when they sell that they have yet to find a replacement home to live in or rent. In most cases, they take the proceeds and buy a new home using the funds they received from the sale. Doing this reduces the amount they have left to use in their retirement years. With the new program, they will only have to use a small portion of the income as a down payment and keep the rest of the income tax-free as their savings. The key here is tax-free income.
By using the Reverse Mortgage program to buy, they will be able to keep their home for the rest of their lives and never make another mortgage payment again. The only thing they will have to pay are taxes, insurance and home maintenance.
It’s time for all of the seniors who have looked or been waiting because of the fees or just didn’t understand the program to look again at the Reverse Mortgage as a financial tool that will change the way everyone else lives. of their lives and free them to enjoy or support themselves in these unpredictable economic times using the biggest investment of their lives, their fearless home.
