Like every story, a reverse mortgage has two sides, good and bad, pros and cons, benefits and disadvantages.

You’ve probably heard of a reverse mortgage, but do you really know what it is? A reverse mortgage is a Home Equity Conversion Mortgage, a (HECM), is a type of home loan for senior homeowners, 62 years or older, that uses the home’s equity as collateral. Cash payments are paid to a senior homeowner based on their home’s equity. A reverse mortgage provides cash payments to a senior homeowner by allowing them to convert part of the equity in their home into cash. Generally, the loan is not due until the last surviving homeowner dies, sells or moves out of the home. The homeowner is responsible for property taxes, homeowners insurance, upkeep, and any relevant condominium fees.

When the last surviving homeowner dies, sells or moves out of the home, the estate must pay off the reverse mortgage or sell the home to pay back the loan balance. The estate has roughly 6 months to do so. If there is any remaining equity, the estate inherits the remainder. If the home sells for less than the balance of the reverse mortgage, the estate is not personally liable.

The idea for a reverse mortgage came about because retired senior homeowners with limited incomes needed a way to pay for healthcare and monthly living expenses. Thus, the reverse mortgage was created and without restriction on how it would be used by the senior homeowner. It allows senior homeowners to use the equity they have built in their homes to help them pay for health care costs and their basic monthly living expenses or take a vacation if they so choose.

A reverse mortgage differs from a traditional mortgage because the lender pays the homeowner cash rather than homeowner making monthly mortgage payments.

A reverse mortgage can be a good way for retired homeowners to increase their spending power and financial security in retirement. However, there are 2 sides to reverse mortgages, benefits, and drawbacks.

Benefits of a Reverse Mortgage:

• You can live in your home for as long as you want without a monthly mortgage payment and improve your immediate financial situation.
• You can tailor and utilize the reverse mortgage as a financial planning tool.
• Your home cannot be taken from you for non-payment as in a home equity loan. You do not make payments on the loan until you permanently leave the home.
• You will never owe more than the value of your home at the time the loan is paid off. This is a great advantage if you secure a reverse mortgage and then the price of your home drops.
• Whether you receive the money from a reverse mortgage as fixed income or in a lump sum, the money is typically tax-free.
• You may use the money from a reverse mortgage however you see fit.
• You can receive the money from a reverse mortgage in one lump sum, as an annuity, a credit line or even as a combination of these.
• You maintain homeownership of your home and are able to live in your home.
• You can rest assured that you have a place to live for as long as you want when you secure a reverse mortgage.
• A reverse mortgage is federally insured.
• A reverse mortgage can increase your spending power and financial security in many ways.

Drawbacks of a Reverse Mortgage:

• Upfront fees on a reverse mortgage are high. (Learn more about reverse mortgage fees here: Reverse mortgage rates and fees)
• Even though you make no monthly payments on a reverse mortgage, the amount of interest you owe and the amount you must eventually pay back accumulates over time.
• You may have built a lot of equity in your home, but a reverse mortgage might allow you to use only some of it. The amount of your reverse mortgage loan is determined by the appraised value of your home, what you still owe on your home, your age and what the current interest rates happen to be.
• A reverse mortgage is the opposite of a traditional home loan. It is a mortgage in reverse. You accumulate the loan over time and pay it all back when you are no longer living in your home. This can be difficult to grasp.

The benefits of a reverse mortgage clearly outnumber the drawbacks, but a reverse mortgage is not for everyone. Here are three things to consider before securing a reverse mortgage:

• If you are eligible for low-income assistance, securing a reverse mortgage could disqualify you from Federal or State government assistance.
• If you are planning to move in the near future, a reverse mortgage is not a good idea since the loan is due when “the last surviving homeowner dies, sells or moves out of the home.”
• A reverse mortgage decreases the equity in your home and affects your estate. (See Innovative Uses of a Reverse Mortgage for more information on these options)

Studies have shown that more than 90 percent of those who have secured a reverse mortgage have less stress and the freedom to choose to live the life they want to live. Learn more about the fees associated with a reverse mortgage or instantly estimate your reverse mortgage loan amount with the Reverse Mortgage Calculator.

A Brooklyn real estate agent with Fillmore Real Estate, I have been collaborating with and helping my clients buy or sell their Brooklyn homes for over 27 years. Do you have further questions about a reverse mortgage? Contact me, Charles D’Alessandro, at (718) 253-9600 ext 206 or email [email protected]. I know real estate and will be happy to answer any questions you may have. Just ask!

Resources:

http://www.newretirement.com/reverse-mortgage/reverse-mortgage-disadvantages-advantages.aspx?nr_product=revmort&nr_a=LI_BidManager&nr_placement=&nr_medium=display&nr_creative=rmdown_blkwhteleg&nr_size=LREC&nr_campaign=StandardCPMV2&nr_adgroup=Desktop&nr_adtype=STTC&utm_medium=display&utm_source=LI_BidManager&utm_content=rmdown_blkwhteleg

http://www.reversemortgage.org/about.aspx

Reverse mortgages are a popular option for homeowners who are 62 years of age and older and need additional income.  Credit scores and income are not part of the qualification process for a reverse mortgage, so they’re fairly easy to get.

But is a reverse mortgage right for you, your parents or grandparents?  Here are some pros and cons to consider before making your decision:

Pros of getting a reverse mortgage on your Brooklyn New York real estate

When you get a reverse mortgage, you can:

• Use the money to supplement social security, pay for home improvements or meet unexpected medical bills.
• Choose the payment method you prefer:  monthly payment, line of credit or lump sum.
• Make no payments on the loan (monthly or otherwise) unless you die, move or sell the home.  If any of those events occur, the loan is due in full, plus interest and fees.

Cons of getting a reverse mortgage on your Brooklyn New York real estate

Unfortunately, there are several disadvantages to taking out a reverse mortgage:

• You pay origination fees that are almost twice as much as origination fees on conventional mortgages.
• There are a wide variety of reverse mortgages available from a lot of different sources.  This makes an already complex loan even more confusing.   Shop around, compare and attend an information session with an approved HUD counselor before deciding on a reverse mortgage.
• It may impact your eligibility for Medicaid and other state or federal programs.  For example, if you currently receive any “need based” benefits such as Medicaid or Supplemental Social Security Income (SSI), reverse mortgage payments will have to be structured so that monthly payments will be spent within the month they are received. If not, such payments will be considered income, and may make you ineligible for public benefits. Contact your benefits provider to ask about how a reverse mortgage may affect your eligibility.

If getting a reverse mortgage on your Brooklyn New York real estate, or the home of your parents or grandparents, is the right thing to do, you might want to consider FHA’s reverse mortgage program called The Home Equity Conversion Mortgage (HECM). According to HUD, the HECM is a safe plan that can give older Americans greater financial security.

You can receive additional free information about reverse mortgages by contacting the National Council on Aging at (800) 510-0301.  I’m also available to help you with this difficult decision.  Give me a call today Charles D’Alessandro your Brooklyn Realtor with Fillmore Real Estate at (718) 253-9600 ext.206 or email [email protected].

If you watch television, read magazines or surf the net, you’ve probably seen ads for reverse mortgages.  Those ads don’t provide many details, so here are the basics you need to know about reverse mortgages.

Are you eligible for a reverse mortgage on your Brooklyn NY real estate?

To be eligible for a reverse mortgage, you must:

• Be at least 62 years old
• Own your home
• Live in the home and claim it as your primary residence

When does the reverse mortgage loan become due?

As the homeowner, you do not have to make any monthly payments on your reverse mortgage.  The loan becomes due when you:

• Permanently move out of your home
• Sell the home or fail to fulfill other conditions like the continued payment of property taxes, homeowner’s insurance and repair and maintenance.
• Pass away

Should you get a reverse mortgage on your Brooklyn NY real estate?

The Consumers Union, the nonprofit publisher of Consumer Reports, suggests you consider all alternatives to a reverse mortgage before taking the plunge.  Alternatives you may want to consider include less expensive programs offering financial assistance, other lower-cost loans or selling your home.

You may want to get a reverse mortgage if you:

• Need additional income and there is no less expensive way to get it.  Use an online reverse mortgage calculator to estimate the amount of money you could get from a reverse mortgage.
• Want to stay in your home and retain ownership
• Do not plan to leave your home to your children or others who will inherit from you.

You may NOT want to get a reverse mortgage if you:

• Want to leave your home, free and clear, to your children or heirs
• Have a less costly means to reach your financial goal
• Become ineligible to receive public benefits such as Medicaid or SSI (Social Security Income) by taking out a reverse mortgage.
• Will have trouble paying your property taxes and homeowner’s insurance.  A 2010 report from the Department of Housing and Urban Development (HUD) estimated that more than 20,000 reverse mortgages were in default for nonpayment of taxes and insurance.  You do not want to get a reverse mortgage only to lose your home to foreclosure and eviction because you’re unable to pay your taxes and insurance.

As always, when you consider taking out a loan of any type, do your homework to make sure this is the right move for you, be sure to read all of the fine print and understand exactly what it is you’re signing.

If you’d like some help determining if selling your home, getting a reverse mortgage or some other lower-cost loan is best for you, give me a call Charles D’Alessandro of Fillmore Real Estate call today at 9718) 253-9600 ext 206 or email me at [email protected].

Some Brooklyn home buyers have an advantage that others don’t in today’s housing market.  They can qualify for an FHA loan.

Federal Housing Administration (FHA) loans help Brooklyn home buyers who would otherwise have trouble being approved for a mortgage.  You can qualify for a loan if you have less than perfect credit.  FHA loans are available even after bankruptcy and foreclosure, if you have maintained good credit for the following two to three years.

What are the requirements for FHA loans?

FHA loans have strict home appraisal guidelines.  The appraisal value helps determine the FHA mortgage limit.  Each state has its own rules regarding maximum loan limits.

What are the advantages to FHA loans?

One advantage of an FHA loan is lower down payment requirements.  You may qualify for a down payment as low as 3.5 percent of the purchase price of the property.  Additionally, most of your closing costs can be included in the loan, so you’ll have less out of pocket expenses.

An FHA loan can also be used to buy a house that needs improvements.  If you need cash to make the repairs, you can apply for a loan to cover the cost of the expected repairs.  The FHA also has energy efficient mortgages which include the costs of energy improvements.

What are the terms of FHA loans?

An FHA loan can take many forms: it may be a fixed-rate loan, an adjustable rate mortgage (ARM) or a reverse mortgage.

• A fixed-rate mortgage has a set interest rate for a set amount of time.  Typically, it will be a 15 or 30-year loan.
• An ARM has a variable interest rate for 15 to 30 years.
• The reverse mortgage pays a set amount of money to the homeowner for the entire time they live in the home.

Whether you’d like to finance a Brooklyn home using an FHA loan or a non-FHA loan, I can help.  Give me a call today Charles D’Alessandro of Fillmore Real Estate at (718) 253-9600 ext 206 or email me at [email protected].