Life with MS

A reverse mortgage is a financial resource for senior homeowners 62 or older with about 50 percent or more equity in their home. Tax-free available funds do not count as income, may be received as a monthly payment, a lump sum, or may grow the available funds in a line of credit feature. 
 
The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through a Federal Housing Authority approved lender.
 
The proceeds of a reverse mortgage are unrestricted and may be used for anything. Therefore, a senior homeowner with MS might be able to take care of his or her own needs, or provide financial assistance for the care of a younger family member with MS.
 
Traditionally, people do not acquire a long-term care insurance policy until they are in their sixties, but MS often strikes at a much younger age.
 
There are many safety nets built into the program to protect senior homeowners.
 
One such requirement is HECM counseling. A list of counselors is provided to each client so they may choose from any of the approved and licensed FHA/HUD reverse mortgage counselors. Counseling is required for an FHA/HUD HECM mortgage and may be done face-to-face or over the phone, whichever is most convenient. Once counseling is completed, two original counseling certificates are mailed. One is to keep and the other is signed and dated. An original counseling certificate is required as part of a loan submission package.
 
Just how much money you can receive depends on your age and your home’s appraised value. Here are some examples:
 
Home Value $100,000
 
At age 62, receive $257/mo or $44,576*
 
At age 75, receive $380/mo or $57,333*
 
At age 85, receive $586/mo or $67,267*
 
Home Value $250,000
 
At age 62, receive $719/mo or $124,240*
 
At age 75, receive $1,028/mo or $155,146*
 
At age 85, receive $1,553/mo or $180,930*
 
Home Value $425,000
 
At age 62, receive $1,319/mo or $237,550*
 
At age 75, receive $1,821/mo or $283,753*
 
At age 85, receive $2,704/mo or $321,832*
 
* Figures shown above are subject to prevailing adjustable rates.  Fixed rates are available.
 
Costs associated with the reverse mortgage include loan fees, third party fees for things such as a survey, the title or appraisal, and the required FHA mortgage insurance – all of which are commonly financed with the reverse mortgage. The appraisal cost which is usually around $350 (sometimes more in rural or remote areas) is one of the few out-of-pocket expenses for the borrower.
 
The program guarantees that you will continue to receive the loan proceeds even if the lender goes bankrupt because each borrower has a note recorded and is insured with FHA and HUD.  It also guarantees that the lender will receive full payment when the loan is due with no burden on the heirs.
 
If you have an existing mortgage on your home, you must first satisfy that, which is paid from the proceeds available from the reverse mortgage. The loan is due when you no longer own and occupy your home as principal residence. Here are some frequently asked questions and answers about reverse mortgages:
 
Q: I have a $200,000 home which I owe nothing on. If I get a reverse mortgage and spend $50,000 then pass away, does the bank get my house?
 
A: No. Your estate would sell the house for $200,000. The estate would pay the bank $50,000 (plus interest and the monthly service fee). The remaining money goes to your heirs. 
 
Q: How popular are reverse mortgages?
 
A: The program is growing at 49 percent annually with 77,000 loans issued in 2006. It was started by the FHA and signed by Ronald Reagan in 1988.
 
Q: What if I have a bankruptcy?
 
A: If it has been dismissed or discharged, it doesn’t affect your eligibility. A Chapter 13 bankruptcy (where you are paying off creditors with a “repayment plan”) may be paid off at closing.
 
Q: Will my heirs be forced to sell my home?
 
A: No. If they decide to keep it, they can refinance the property with a traditional mortgage or from other sources. Otherwise, they may sell the house and use the proceeds to repay the loan balance and keep the difference.
 
Q: Can you take my home away if I outlive the loan?
 
A: No. You can not “outlive” the loan. As long as one borrower continues to live in the home and keeps taxes and insurance current, you can not be evicted, foreclosed, or asked for repayment. 
 
Q: Will a reverse mortgage affect my public benefits?
 
A: No. A reverse mortgage will not affect Social Security or Medicare.
 
Q: My property is held in a Living Trust. Do I qualify?
 
A: Yes, as long as you are the primary trustee.
 
Q: I would like to downsize. Can a reverse mortgage be used for purchasing a home?
 
A: Yes. The home purchase loans have the same age and equity requirements as a regular reverse mortgage. 
 
Q: My spouse is permanently in a nursing home. Can we participate?
 
A: Yes, only one owner is required to occupy the property.
 
Q: Does the FHA have a loan limit?
 
A: Yes. Currently, the national Home Equity Conversion Mortgage loan limit is $625,500 until the end of 2009. As of January 1, 2010 the limit will be $417,000.
 
Q: If my situation changes, can payment options be restructured?
 
A:  Yes, they may be changed as often as needed to meet your changing needs.
 
Q: Are there any asset or income limitations on the borrower, and is credit score a factor?
 
A:  No, the funds available are not based on your credit score, your assets, or your ability to repay the loan. Rather, they are based solely on the age of the youngest borrower who is 62 or older and the appraised property value up to the national lending limits.
 
Reverse Mortgage expert Pamela Kirkpatrick is Senior Vice President of the Reverse Mortgage Division for Allied Mortgage Group's (AMG) Dania Beach, Fla., office. She coordinates reverse mortgages for AMG branches in 34 states.  Appointed to the National Reverse Mortgage Lender's Association (NRMLA) Congressional Committee, Pamela maintains a relationship with elected officials to keep them advised of reverse mortgage issues and to provide educational outreach. As part of those efforts, Pamela holds a "Certificate of Special Congressional Recognition" for outstanding and invaluable service to the community. You may contact Pamela Kirkpatrick directly at (954) 342-2033 or call toll free (866) 938-5572. Pamela’s e-mail is pamela@reverseultra.com.
 
(Last reviewed 10/2009)