Reverse Mortgages - FHA HECM

By John Mazzara

The concept of a Reverse mortgage

Any home owner above the age of 62 years (since the minimum requirement age is 62 years old) can receive cash flow from the accrued equity on their home (property). The payments are free of tax and does not require repayment. The reverse mortgage is ultimately paid off sometime in the future when the home is sold. There are however, certain conditions which a home owner needs to fulfill to be eligible for a Reverse mortgage loan.

A Reverse mortgage loan requires the following conditions to get approved:

*For a senior Reverse mortgage, a house owner needs to be at least 62 years old
*The home has to be the primary residence of the home owner
*Before or after the completion of the HUD application, counseling by a certified HUD counselor is required. Counseling is mandatory and must be done before the loan is funded.
*The house has to be a single family residence or mobile home built on any permanent foundation which is built after July 1976, condos or 1-4 unit buildings.

Some considerations related to obtaining a Reverse mortgage:

*Home ownership remains with the homeowner for the entire life and the remaining equity is passed on to the heirs.
*Proceeds from a senior housing option are tax free.
*No repayments are to be made as long as the home owner is residing in the home.
*The proceeds can be used for almost all purpose like repairs and home improvements, education of grandchildren, paying off credit card debts, medical expenses, paying taxes etc.

There are certain costs for a Reverse mortgage like the mortgage insurance premium (paid to the FHA at loan funding and then accruing monthly), loan origination fee (given to mortgage brokers or mortgage lender) and other traditional closing costs (which generally include the title policy, documentation fee, notary fee etc.).

The FHA (the acronym for Federal Housing Administration) reserve mortgage program is known as the Home Equity Conversion Mortgage (HECM). The FHA HECM provides cash flow to the homeowner based on the equity accumulated on the house. Like all reverse mortgages, the FHA HECM does not ask for any repayment on the mortgage until the home owner dies or decides to move out by selling the property. Today the reserve mortgages are also provided by the commercial lenders using conventional loans.

The current economic turmoil in the financial markets has been worsened by the fact that some retired home owners are also facing the pain of adjustable rate mortgages. Combine this with a job loss or forced retirement and you have a situation where money is tight. Another factor is decreased income from poor performing investments. This situation can lead to a foreclosure. Senior reverse mortgages may provide a sigh of relief. Traditional refinancing with another adjustable rate mortgage (ARM) or a fixed rate mortgage (FRM) may no longer a viable option. The FHA HECM gives them the option of paying off their existing loan and stopping a foreclosure with reverse mortgage proceeds. Qualifying is based only on age and equity in the home-not credit. This can be a viable option that should be explored if the senior wishes to remain in their home and has enough equity to pay off their existing mortgage liens.

Learn more about reverse mortgage loans-FHA HECM and conventional at http://www.MinnesotaReverseMortgage.net John Mazzara is involved with financial services in the Twin Cities, MN. Officing out of Edina, Minnesota-John is centrally located within the 7 county MN metropolitan area. John owns three separate businesses-a licensed real estate broker associate selling Minnesota real estate since 1986-affiliated with RE/MAX Associates Plus http://www.MinneapolisStPaulHomes.com, an independent CFP-certified financial planner since 1989 with an independent Minnesota financial planning firm-Financial Planning Associates and the owner of a Minnesota mortgage broker firm-Venture Development Inc-specializing in residential, commercial and investment mortgages for purchases of single family homes, investment properties and commercial property. Venture brokers FHA, VA, Conventional loans and lines of credit. If you are looking for someone to help you in the areas of real estate sales/purchase, mortgages, or and/or financial planning and insurance you should call John for a free 1 hour consultation to see if he can meet your needs. 952-929-2577. RE/MAX Associates Plus and Venture Development are located at 7300 France Ave S, Suite 410, Edina, MN 55435

Photo by Joe Boyce - Burgess

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