Home Equity Conversion Mortgage is the official phrase for "reverse mortgages". Here are some highlights:
(1) All borrowers must be at least 62 years old
(2) You must use your personal, primary residence
(3) Reverse mortgage must be the "first mortgage", so any existing mortgages must be paid off
(4) TALC = Total Annual Loan Cost are expensive (the fewer years in the home the more costly)
(5) Closing costs include "up to" 2% broker's commission (but this can be negotiated)
(6) If using FHA, then another 2% mortgage insurance premium is a part of closing costs; now we are up to 4% front-end costs
(7) Balance, plus interest, must be paid within 9-12 months after the borrower vacates the property (as a result of moving to an assisted-living facility, death, or sale)
This is an expensive means to an end and can result in significant degradation in the equity in the home and potential value for heirs to inherit.
It is important, therefore, to seriously consider the alternatives to obtaining a reverse mortgage to meet immediate income needs, for example:
(1) Sell the house instead and downsize
(2) Adult children "gift" money to the parents to meet income needs (protects home value)
(3) SSI = Social Security Supplemental Income (available if very low income)
(4) Size of the reverse mortgage (only obtain what is really needed to meet basic income needs)
(5) DPL = Deferred Payment Loans for repairs (in effect, a regular HELOC or mortgage though you do have to make monthly payments instead of receive monthly payments)
(6) PTD = Property Tax Deferrals (some counties waive property taxes based on income and assets owned outside of the home's value)...I will write more about this separately.
AARP has a very nice brochure called "A Consumer's Guide to Reverse Mortgages".
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.