Post by jeffolie on Jan 5, 2013 13:52:41 GMT -6
reverse mortgages & family feelings
For the price of a 'free meal' most sellers of reverse mortgages will 'educate' those over 62 about the products they sell to seniors ... these are sales pitches by commission only specialists in persuading the elderly to get cash up front.
my jeffolie view: reverse mortgages become the end of passing on the home equity to heir in trade for cash upfront ... making this lifestyle, financial choice can be very important . The emotional, family ties can easily decide your mind.
The temptation to live for today looms large and reasonable people can appreciate taking this selection. Most of the very old have poor quality of life and the home equity does not improve their quality of life impaired by medical and declining physical abilities.
Passing home equity to one's heirs may be important or not in part on how good or poor one's relationships become during the ending years. This might be a bargaining chip to tie greedy relatives to be in touch and invitations to their family events.
On the other side of poor family feelings, one might select to enjoy life better than leave money to ungrateful and disrespectful relatives.
============================================
Money Watch: How risky is a FHA reverse mortgage?
January 5, 2013
Story Highlights
A reverse mortgage should be a last resort
It can rapidly deplete your home equity
Loan origination fee, mortgage insurance and other fees are costly
Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com
Q: What is the FHA Home Equity Conversion Mortgage or HECM? It looks like a no-risk situation for someone who qualifies. What's your opinion about the program, and how is it different from other reverse-mortgage programs?
A: The Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) is a reverse mortgage. So before you get stuck in the differences between a HECM and any other reverse mortgage, the first question you have to answer is, "Should I really be considering a reverse mortgage?"
If you can declare the next four statements as TRUE, then you may be able to justify considering a reverse mortgage:
1. I need cash — monthly, lump sum or randomly.
2. I intend to live in this home indefinitely.
3. I am not concerned about retaining any equity in the home, whenever I depart it.
4. I fully understand and am comfortable with the costs of a reverse mortgage.
The reasons why a reverse mortgage should be an option of last resort in your financial plan are as follows:
• Although the costs have come down tremendously, reverse mortgages are still costly.
• Because of the upfront costs, one must utilize the product for years before the benefits warrant the costs.
• Most heading into retirement do not have adequate assets — or comparable long-term care insurance — to offset the costs of a long-term health care event not covered by Medicare (and there are many). Therefore, the equity in their home is often the "ticket" into a comfortable independent, assisted or nursing care facility. As Tim Donohue of Corridor Mortgage Group told me, "Once the equity of the home has been tapped through a reverse mortgage, it's hard to get it back, and it is generally needed in the future."
• Lastly, the optimal retirement plan is one free from debt, not one in which it is designed to perpetually increase.
Do you still want a reverse mortgage? If so, the decision between a HECM and a proprietary reverse mortgage funded by a private lender has become relatively moot for all new reverse mortgage prospects. According to Andy Quintilian and Ryan McCarty of Atlantic Home Equity, the FHA HECM program is "the only reverse mortgage available in the market today" (as of Dec. 29, 2012).
The vast majority of outstanding reverse mortgage are indeed HECMs, and this is because they are insured by the FHA. This insurance guarantees that you will receive the payments — without risk of the default of a private lender — and that the borrower will be able to stay in the home even if the mortgage payments exceed the value of the home at a later time.
The price of that peace-of-mind is upfront and annual mortgage insurance premiums (1.25% of the balance). Additionally, HECMs can only be levied against primary residences and are capped at $625,000.
There are many knowledgeable and well-intended mortgage representatives (and more than a handful who are neither) who have seen the reverse mortgage open up an entirely new market that previously did not exist.
And because they are typically compensated when you use their products and not when you don't, you must be cautious and weigh their advice carefully.
It is best that you confirm your direction with a third party, like a fee-only financial planner (but only one who is knowledgeable on the subject), who can give you some conflict-free guidance.
www.usatoday.com/story/money/personalfinance/2013/01/05/reverse-mortgage-risks-fha/1807389/
For the price of a 'free meal' most sellers of reverse mortgages will 'educate' those over 62 about the products they sell to seniors ... these are sales pitches by commission only specialists in persuading the elderly to get cash up front.
my jeffolie view: reverse mortgages become the end of passing on the home equity to heir in trade for cash upfront ... making this lifestyle, financial choice can be very important . The emotional, family ties can easily decide your mind.
The temptation to live for today looms large and reasonable people can appreciate taking this selection. Most of the very old have poor quality of life and the home equity does not improve their quality of life impaired by medical and declining physical abilities.
Passing home equity to one's heirs may be important or not in part on how good or poor one's relationships become during the ending years. This might be a bargaining chip to tie greedy relatives to be in touch and invitations to their family events.
On the other side of poor family feelings, one might select to enjoy life better than leave money to ungrateful and disrespectful relatives.
============================================
Money Watch: How risky is a FHA reverse mortgage?
January 5, 2013
Story Highlights
A reverse mortgage should be a last resort
It can rapidly deplete your home equity
Loan origination fee, mortgage insurance and other fees are costly
Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com
Q: What is the FHA Home Equity Conversion Mortgage or HECM? It looks like a no-risk situation for someone who qualifies. What's your opinion about the program, and how is it different from other reverse-mortgage programs?
A: The Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) is a reverse mortgage. So before you get stuck in the differences between a HECM and any other reverse mortgage, the first question you have to answer is, "Should I really be considering a reverse mortgage?"
If you can declare the next four statements as TRUE, then you may be able to justify considering a reverse mortgage:
1. I need cash — monthly, lump sum or randomly.
2. I intend to live in this home indefinitely.
3. I am not concerned about retaining any equity in the home, whenever I depart it.
4. I fully understand and am comfortable with the costs of a reverse mortgage.
The reasons why a reverse mortgage should be an option of last resort in your financial plan are as follows:
• Although the costs have come down tremendously, reverse mortgages are still costly.
• Because of the upfront costs, one must utilize the product for years before the benefits warrant the costs.
• Most heading into retirement do not have adequate assets — or comparable long-term care insurance — to offset the costs of a long-term health care event not covered by Medicare (and there are many). Therefore, the equity in their home is often the "ticket" into a comfortable independent, assisted or nursing care facility. As Tim Donohue of Corridor Mortgage Group told me, "Once the equity of the home has been tapped through a reverse mortgage, it's hard to get it back, and it is generally needed in the future."
• Lastly, the optimal retirement plan is one free from debt, not one in which it is designed to perpetually increase.
Do you still want a reverse mortgage? If so, the decision between a HECM and a proprietary reverse mortgage funded by a private lender has become relatively moot for all new reverse mortgage prospects. According to Andy Quintilian and Ryan McCarty of Atlantic Home Equity, the FHA HECM program is "the only reverse mortgage available in the market today" (as of Dec. 29, 2012).
The vast majority of outstanding reverse mortgage are indeed HECMs, and this is because they are insured by the FHA. This insurance guarantees that you will receive the payments — without risk of the default of a private lender — and that the borrower will be able to stay in the home even if the mortgage payments exceed the value of the home at a later time.
The price of that peace-of-mind is upfront and annual mortgage insurance premiums (1.25% of the balance). Additionally, HECMs can only be levied against primary residences and are capped at $625,000.
There are many knowledgeable and well-intended mortgage representatives (and more than a handful who are neither) who have seen the reverse mortgage open up an entirely new market that previously did not exist.
And because they are typically compensated when you use their products and not when you don't, you must be cautious and weigh their advice carefully.
It is best that you confirm your direction with a third party, like a fee-only financial planner (but only one who is knowledgeable on the subject), who can give you some conflict-free guidance.
www.usatoday.com/story/money/personalfinance/2013/01/05/reverse-mortgage-risks-fha/1807389/