Las Vegas, Nevada Seniors- Take Advantage of New Reverse Mortgage Laws

Higher Reverse Mortgage Loan Limits

The loan limits for FHA-insured reverse mortgages have been increased to $625,000 across the entire country (only until December 31, 2009! Unless new legislation is passed before the end of the year) – not just the higher cost areas. The previous limit was $417,000 across the country. This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated.

This coincides with another little-known change in the reverse mortgage arena: the availability of reverse mortgages on home purchase transactions. This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell. Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.

COMMON QUESTIONS AND MISCONCEPTIONS ABOUT REVERSE MORTGAGES IN LAS VEGAS, NEVADA

Misconception #4

WHEN A REVERSE MORTGAGE COMES DUE, THE BANK SELLS THE HOME.

INCORRECT.

When the loan must be repaid, you or your heirs can either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage.

How much will be owed when my reverse mortgage comes due?

The amount that is owed to the lender typically includes the amount borrowed to date, the amount of accrued interest, accrued mortgage insurance premiums (for the HECM), servicing fees, and any other costs and fees financed as part of the loan amount. In no event will the repayment amount exceed the value of the home at the time that the loan comes due. There are no prepayment penalties for the current reverse mortgage products.

What happens if I move out of my house after I get a reverse mortgage?

Once you no longer occupy your home as your principal residence for more than one year, the reverse mortgage comes due and must be repaid. Similarly, if you sell your house, the reverse mortgage comes due.

What happens when my house gets passed to my heirs?

Once your home is passed to your heirs, the reverse mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sales proceeds.

Reverse Mortgage Misconceptions in Las Vegas, Nevada

Misconception #3

THE BANK OWNS THE HOME AFTER YOU GET A REVERSE MORTGAGE.

INCORRECT.

You own your home and retain title throughout the life of the reverse mortgage. Once you permanently move out of your home or pass it to your estate, the loan must be repaid.

Am I required to receive counseling before I get a reverse mortgage?

Yes. Counseling, one of the safeguards of reverse mortgages, is required for all three current reverse mortgage products before you can obtain a loan. Counseling is an educational session at which you are informed about reverse mortgages and your other options.

Is the money from a reverse mortgage taxable income? Will it affect my Social Security benefits or other government benefits?

Funds from a reverse mortgage are tax-free; it’s your money, not additional income. A reverse mortgages does not affect regular Social Security or Medicare benefits. To assess the impact, if any, on other federal or state assistance or medical programs, you may wish to consult with your local Area Agency on Aging (to locate, call 1-800-677-1116, or visit http://eldercare.gov), a reverse mortgage lender, or a tax attorney.

Who owns title to my home while my reverse mortgage is outstanding – the bank or me?

You retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home purchase mortgage.

Am I required to pay anything during the course of the reverse mortgage loan?

No. The flow of payments is reversed during the term of the reverse mortgage – the lending institution pays you. However, you are responsible for keeping up payments for your homeowner’s insurance and property taxes, and to maintain the condition of your home.

Are there any limits on how I can use the funds from a reverse mortgage?

No. Borrowers have spent the funds from reverse mortgages for a variety of purposes. Among these have been to pay health care expenses, supplemental retirement income, home improvements, home modifications, higher education, gifts to others, and long term care insurance premiums. Some have used a reverse mortgage to purchase recreational vehicles, start a small business, and travel the Amazon. Some have used reverse mortgages to eliminate expenses by paying off mortgages and credit card debt. The only limit on how you use a reverse mortgage is your imagination.

Reverse Mortgage Misconceptions in Las Vegas Nevada

Misconception #2

YOUR HOME MUST DEBT-FREE TO QUALIFY FOR A REVERSE MORTGAGE.

INCORRECT.

Even seniors with an outstanding first mortgage or some other debt on heir home may qualify for a reverse mortgage. The proceeds of the reverse mortgage, though, must first be used to pay off such debts.

How much money can I get?

This depends on a few factors, including your age at the time of loan closing, the value of your home, the amount of built-up home equity, and interest rates at the time of origination. Other factors are the type of reverse mortgage product and particular payment option you select. Calculators that can help you estimate how much you could receive under different products and payment options are available at NRMLA’s Web site (http://www.reversemortgage.org), lenders and counselors.

What are my payment options?

You decide how to receive the money generated by a reverse mortgage. In general, your payment options are:

• An upfront lump sum payment;
• Line of credit;
• Fixed monthly payments for as long as you remain in your home (or a predetermined, shorter period); or, if you choose.
• A combination of monthly income and line of credit.

How much does a reverse mortgage cost?

What are the upfront and closing fees?

Many of the same costs of home purchase mortgages apply to reverse mortgages. You can expect to be charged an origination fee, an upfront mortgage insurance fee (for FHA Home Equity Conversion Mortgages, or HECMs), an appraisal fee, and certain other standard closing costs. In most cases these fees and costs are capped and may be financed as part of the reverse mortgage.

Do I need to get an appraisal of my home to get a reverse mortgage?

Yes. Since the value of your home is a factor in determining how much money you can get from a reverse mortgage, an appraisal is required. Normally the lender will order the appraisal, which is paid for by the borrower at the time of application.

Do I need a lawyer to apply for a reverse mortgage?

Legal counsel if not required. However, NRMLA encourages you to seek the advice of a legal, tax, or financial advisor before committing to a reverse mortgage.