Many people have seen TV ads featuring actor Robert Wagner encouraging senior citizens to consider reverse mortgages to provide extra dollars for their golden years.
In a regular mortgage, homeowners make payments to lenders. In a reverse mortgage, however, homeowners receive money from a lender and usually are not required to pay it back as long as they live in their homes, according to the Federal Trade Commission.
Reverse mortgage loans, based on home equity, are repaid when homeowners die, sell their homes or no longer live in the residences.
In a regular mortgage, homeowners make payments to lenders. In a reverse mortgage, however, homeowners receive money from a lender and usually are not required to pay it back as long as they live in their homes, according to the Federal Trade Commission.
Reverse mortgage loans, based on home equity, are repaid when homeowners die, sell their homes or no longer live in the residences.
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“Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations,” a report from the FTC states.
SouthEast Arizona Governments Organization, headquartered in Bisbee, offers reverse mortgage counseling at no charge, said Julie Packer, the organization’s housing programs administrator. A SEAGO counselor will counsel homeowners at their residences. There is no need to travel to Bisbee for this service.
Packer said reverse mortgages are for senior citizens who have paid off or nearly paid off their regular mortgage.
“It’s not for everyone, though,” Packer said. “It’s kind of like home ownership. Home ownership is not for everyone.”
According to the FTC, reverse mortgage loan advances are not taxable and usually do not affect Social Security or Medicare benefits. Owners retain titles to their homes and are not required to make monthly repayments.
The loan must be repaid when the last surviving borrower dies, sells the home or no longer lives in the house as a principal residence.
There are three types of reverse mortgages: Single-purpose, which are offered by some state and local government agencies and nonprofit organizations; home equity conversion mortgages, known as HECM, which are federally insured, and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.
Single-purpose reverse mortgages generally have low costs, but they are not available everywhere, and they can be used for one purpose specified by the government or nonprofit lender.
Proprietary mortgages and HECMs tend to be more costly and are widely available — and carry higher upfront costs to homeowners.
In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
There are several features of a reverse mortgage to consider, including the following:
• Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders may also charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
• The amount owed on a reverse mortgage usually grows over time. Interest is charged on the outstanding balance each month and added to the amount owed.
• Reverse mortgages may have fixed or variable rates. Most have variable rates that will likely change.
• Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause in most reverse mortgages prevents either you or your estate from owing more than the value of your home when it is repaid.
• Owners retain titles to their homes and remain responsible for property taxes, insurance, utilities, fuel, maintenance and other expenses.
• Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or in full.
• For homeowners at least 62 years old, a reverse mortgage can be used to generate funds to prevent the foreclosure of a regular mortgage.
Packer said anyone considering a reverse mortgage should try to use a local lender or one of the larger, well-known banks, such as Bank of America or Wells Fargo.
She also said to make sure the appraiser is familiar with property values in Graham or Greenlee counties, and does the appraisal with local criteria in mind.
SouthEast Arizona Governments Organization, headquartered in Bisbee, offers reverse mortgage counseling at no charge, said Julie Packer, the organization’s housing programs administrator. A SEAGO counselor will counsel homeowners at their residences. There is no need to travel to Bisbee for this service.
Packer said reverse mortgages are for senior citizens who have paid off or nearly paid off their regular mortgage.
“It’s not for everyone, though,” Packer said. “It’s kind of like home ownership. Home ownership is not for everyone.”
According to the FTC, reverse mortgage loan advances are not taxable and usually do not affect Social Security or Medicare benefits. Owners retain titles to their homes and are not required to make monthly repayments.
The loan must be repaid when the last surviving borrower dies, sells the home or no longer lives in the house as a principal residence.
There are three types of reverse mortgages: Single-purpose, which are offered by some state and local government agencies and nonprofit organizations; home equity conversion mortgages, known as HECM, which are federally insured, and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.
Single-purpose reverse mortgages generally have low costs, but they are not available everywhere, and they can be used for one purpose specified by the government or nonprofit lender.
Proprietary mortgages and HECMs tend to be more costly and are widely available — and carry higher upfront costs to homeowners.
In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
There are several features of a reverse mortgage to consider, including the following:
• Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders may also charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
• The amount owed on a reverse mortgage usually grows over time. Interest is charged on the outstanding balance each month and added to the amount owed.
• Reverse mortgages may have fixed or variable rates. Most have variable rates that will likely change.
• Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause in most reverse mortgages prevents either you or your estate from owing more than the value of your home when it is repaid.
• Owners retain titles to their homes and remain responsible for property taxes, insurance, utilities, fuel, maintenance and other expenses.
• Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or in full.
• For homeowners at least 62 years old, a reverse mortgage can be used to generate funds to prevent the foreclosure of a regular mortgage.
Packer said anyone considering a reverse mortgage should try to use a local lender or one of the larger, well-known banks, such as Bank of America or Wells Fargo.
She also said to make sure the appraiser is familiar with property values in Graham or Greenlee counties, and does the appraisal with local criteria in mind.
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