Oct 02

Reverse Mortgages

REAL ESTATE BEAT

Reverse Mortgages
Written by Bill Barksdale

Check with your financial advisor, but I’ve been told that the IRS does not consider loan advances as income, therefore, not taxable.

How much do I get?  Well, that is determined by how much equity you have in your home, your age (the older the borrowers are the more they receive, generally), the interest rate and up front costs of getting the loan are also factored in.  There are handy loan calculators at a couple of web sites like aarp.org (American Association of Retired Persons), and reversemortgageguides.org.

One of the most common reverse mortgage products is the FHA Home Equity Conversion Mortgage program (HECM). This may be the safest type of reverse mortgage product to explore.   Currently FHA (Federal Housing Administration) is developing a new program to help cut the up-front costs of getting a reverse mortgage in place.  Ask your lender about this program.  It’s called “HECM Saver” loan.  The payments to the borrower will be a bit lower but the program should have lower up front costs for the borrower and cut losses to the program greatly, thus making it a more affordable program to administer.  You can get an HECM counselor by phoning 1-800-569-4287 or you can go on line to www.hud.gov for all kinds of on-line assistance regarding housing.

BEWARE OF SCAMS.  There are a lot of sleaze-balls out there that make their living by cheating people out of their money.  Older people are a favorite target.  AARP warns of one of the latest.  A green post card from a group calling itself National Data Research has a great come-on.  They advertise a “New Government Program for Seniors over 62” in which they purport to help you pay off debt, “enhance your life-style”, and many other desirable things.  According to AARP they are just gathering your personal contact information to steer you to vendors of reverse mortgages who will make unsolicited calls to you.

I’ve heard of other scams where unwary consumers have lost their homes to unconventional reverse mortgage schemes that can force a borrower from their home.  Some have dramatic rate increases, pay-back requirements not normally included in conventional reverse mortgages, and “kick-out” clauses that force the borrower out of their home.  I suggest you stay away from private money reverse mortgage lenders and stick with reputable programs like the HUD HECM loan.  If someone phones you unsolicited and tries to talk you into a reverse mortgage or tries to gather personal information like bank account information, social security numbers, etc– JUST HANG UP.  Repeat, JUST HANG UP.  It’s OK.

If you have enough money to live on, I don’t recommend getting a reverse mortgage.  This is not a product intended to use for taking expensive vacations and purchasing unneeded “stuff”.  It’s not for buying stocks and other risky investments.  It’s not intended for a short-term loan.  As with anything, proceed with caution.

There is a new coordinated program called “Aging In Place”.  It’s designed to help seniors stay at home and have a better life as they get older.  Do a web search for “aging in place” and have a look.  If you don’t use a computer, ask someone who does to assist you.  Try the Senior Center or go to the library.  Ask someone there to help you get on line and search for “aging in place”.  Don’t be afraid of computers if you haven’t used one.  They’re a great help and much easier to use than you ever imagined.  Mendocino College here in Willits and in Ukiah have introductory classes on how to use one. There’s a whole world of help out there and a lot more information available about reverse mortgages.

As always, be a smart consumer.  See if a reverse mortgage would help you.  Call a HUD / HECM counselor if you need more information.  Enjoy life, dear reader!

ABOUT THE AUTHOR, Bill Barksdale: I have been selling real estate in the Willits/Mendocino Co. market for over 18 years. I can be reached at Coldwell Banker Mendo Realty Inc. PH: 707.459.8888 or Email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . I hope you will find my site (Bill Barksdale's Real Estate Site) of use to your home buying or selling a home now or in the future.

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