Down sizing with a Reverse Mortgage - A Retirement Tool -Ask Yourself these

Considering a reverse mortgage? Here are some questions to ask your self first. It's quoted time and time again; over 95% of seniors want to live the duration of their retirement years in their own homes. Often consumers will start their research on programs, costs and numbers. I propose that if you are looking at using a reverse mortgage to improve and enhance your retirement lifestyle, you ask yourself a few questions before you consider reverse mortgage program numbers and costs.

Is this the house I plan on staying in for the rest of my life?

Is this a house that I can afford to stay in the rest of my life?

Will it need a new roof, painting or a new furnace? Do I have the funds for this or will it be a struggle?

Can I easily pay my property taxes?

Can I maintain my home myself or do I have the resources to have my home maintained for me? Handyman work, house cleaners, laundry and grocery shopping etc.

Or if I don't have the financial means to pay for these things when I either don't want to or can't do them, do I have reliable family or friends that are willing to help me as I age?

Do I have the emotional, physical & financial resources to stay in this particular house?

Are my bedrooms upstairs? If I am injured or have arthritic knees, will I be able to move about the house safely?

Do I have more house than I really want?

Would it make sense for me to down size?

Would it make sense for me to move closer to my son or daughter?

Would I be better off if I sold my home, added my profits to my retirement resources and buy a smaller home with a reverse mortgage?

By staying in this house will I able to maintain my independence and set myself up for healthy aging on all levels or should I consider downsizing?

Potential Downsizing examples for Mr. & Mrs. Anderson moving from a $700k valued home to a $430k valued home and Mr. & Mrs. Jones moving from a $420k valued home to a $300k valued home:

Mr. & Mrs. Anderson are both ages 68. The Andersons own a home valued at $700k and they owe $220k. After commissions, closing costs, mortgage payoff & moving etc. the Andersons retain an estimated $430,000 from their sale. Instead of paying cash for their new retirement home, the Andersons either:

A. Purchase a $430,000 home with a reverse mortgage put down a one time payment of $180,000 and have no house payments for the life of their loan. They also take the balance of $250,000 as principal residence tax exempted proceeds (Internal Revenue Code 121 principal residence sale tax exemption; consult your tax advisor).

Or

B. Purchase a $430, 000 with a reverse mortgage and set up a credit line that is liquid and tax free when accessed. The unused portion of the credit line grows at the same rate as the loan rate, this gives the Andersons approximately a $250,000 credit line and every year has access to more money
guaranteed.

Mr. & Mrs. Jones are both ages 68. The Jones’s own a home valued at $420k and they owe $40k. After commissions, closing costs, moving etc. the Andersons retain an estimated $350,600 from their sale, moving and mortgage payoff. Instead of paying cash for their new retirement home, the Jones’s either:

A. Purchase a $300,000 home with a reverse mortgage, put down a one time payment of $119,000 and take the balance of $231,600 as principal residence tax exempted proceeds (Internal Revenue Code 121 principal residence sale tax exemption; consult your tax advisor). The Jones’s will have no house payments, purchasing with a reverse mortgage.

Or

B. Purchase a $300,000 home with a reverse mortgage and set up a credit line of $181,000 that is liquid and tax free when accessed. The remaining balance of $50,600 is taken as principal residence tax exempted proceeds (Internal Revenue Code 121 principal residence sale tax exemption; consult your tax advisor). The unused portion of the credit line grows at the same rate as the loan rate; this gives the Joneses an approximate $181,000 credit line. This credit line grows at the same rate as their loan rate. Every year they will have access to more money guaranteed.

If you have a reverse mortgage questionFind Article, CALL Angella Conrard at 866-949-7030 or log onto www.pro-bargainhunter.com.

Reverse Mortgage for purchase - a new tool for retirement

Purchasing a home in your retirement years just became easier for seniors looking to move, downsize or upsize with no credit score requirements or house payments for the life of the loan. HR. 3221, signed into law last summer has a provision for using reverse mortgages for home purchase that is projected to take effect January 09'.

HUD just issued a mortgagee letter describing the guidelines on how to purchase a home with a government insured reverse mortgage. Various lenders offer variable and fixed rate HECM reverse mortgage programs. Your reverse mortgage advisor should discuss your goals and present the current program choices that are available to you.

How do your purchase with a reverse mortgage? How do they work? Homeowners or potential homeowners qualify for reverse mortgage proceeds based upon the youngest borrower’s age and the appraised value of the home. In a home purchase with a reverse mortgage it works the same.

For example: A 68 year old borrower can purchase a $400k home with a down payment of $155k-$206k depending on the program chosen (programs vary with current interest rates, indices, variable or fixed loan programs) and have NO PAYMENTS for the life of the loan.

This is a powerful cash flow tool for seniors. HUD has issued some guidelines in their mortgagee letter. Given our recent history these guidelines are in place to protect the borrowers, avoid fraud, abuses and property flipping.

Here are some of the guidelines:

• Newly constructed homes must be completed and a Certificate of Occupancy must be issued prior to closing.
• Homeowners must occupy their purchased home within 60 days of closing.
• Lenders must verify funds prior to closing, closing funds can be from the sale of a previous residence.
• There can be no bridge loans or "gap" financing to meet the down payment or cash requirements of a reverse mortgage for purchase.
• Reverse Mortgage counseling is required for all potential borrowers.
• There is no three day right of rescission period in a reverse mortgage for purchase transaction.
• When closing no other liens against the property can exist.

Any resale of a property may not occur 90 or fewer days from the last sale. Other provisions apply.

HUD decided to base reverse mortgage for purchase proceeds on the appraised value of the home. In the past, reverse mortgage programs that allowed home purchasing were based upon the lesser of appraised value or purchase price. With HUD's new HECM for purchase guidelines, a borrower can potentially put down fewer proceeds if their future home appraises for more than their purchase price.

Reverse mortgages for purchase is another tool for seniors to improve their retirement lifestyle by putting more money in their pocket each month by potentially downsizing, moving closer to kids & eliminating burdensome home maintenance. Just as a family can outgrow a home and need more space, in your retirement years it may make more sense to move to a lower maintenance, mature friendly home in size and floor plan. Reverse mortgages for purchase are an excellent idea and option for aging seniors and in the future boomers. If you have a reverse mortgage question, call Angella ConrardScience Articles, Reverse Mortgage Advisor at 866-949-7030 or log onto www.reverse-your-mortgage.com

Click Here to calculate how much home you can borrower with a reverse mortgage.