Katrina survivors could try a reverse mortgage

Q: MY PARENTS lost their home in the New Orleans area during the Katrina hurricane. They had insurance on their home, but it is not enough to rebuild a new home for them. They're in their mid-60s, have very modest incomes and need my help.

They will receive about $100,000 from the insurance company but a new home will cost about $200,000. I have about $40,000 to kick in to help them. My question is this: What would be the best way for me to structure this so it costs me as little as possible? I figure I will have to make the mortgage payments on whatever amount needs to be financed.

— Eddy, Roseville

A: Your parents are fortunate to have a son like you who is both willing and able to help them out. There are countless others who have been impacted by Katrina who are not so fortunate.

The traditional way for you to make this happen is to purchase the home jointly. Your parents would kick in their $100,000 insurance settlement, you would kick in your $40,000 savings and you would all be responsible for the mortgage payments, taxes and insurance. However, a less conventional approach may get your parents into a home without costing you a dime. Rather than using a regular mortgage to make up the difference between the down payment and the purchase price, you should consider using a reverse mortgage. Your parents could purchase an existing home using their down payment, and a federally insured reverse mortgage could make up the difference. Depending upon the purchase price, you might not be on the hook at all.

Unlike a traditional mortgage, a reverse mortgage requires no monthly payments. Interest is still charged on the outstanding balance, but rather than the interest being paid each month, it is added to the loan balance. Your parents are guaranteed the right to live in their home until their dying day, and any equity left in the home upon their death can go to their kids. In the event the home does not appreciate as fast as the interest accrues, they are under no obligation to pay the loan off when they vacate the home. I suggest you do some research on the reverse mortgage before you do anything else.

Call 1-888-973-8377 to speak with a Reverse Mortgage Specialist

Source: Bob Bruss

When will I be eligible for a Reverse Mortgage?

IF YOU ARE 62 OR OLDER, YOU ARE ELIGIBLE FOR A REVERSE MORTGAGE

DEAR BOB: When my mother, age 85, passes away, her house will become mine. I have lived in her house for over 30 years. I am now 58. When I inherit the house, will I be eligible for a reverse mortgage? – Sharon A.

DEAR SHARON: After you become 62, you should be eligible to obtain a reverse mortgage secured by your principal residence.

We have put together a Reverse Mortgage Questions page.

Source: Bob Bruss

Senior Life Settlement

A Senior Life Settlement is the sale of an existing life insurance policy by an individual 65 years of age or older. All things change with time, including your life insurance coverage needs. While a life insurance policy can be an important asset at one stage of your life, the same policy may become unneeded or unwanted. A Senior Life Settlement lets you convert a non-performing, illiquid asset into cash or another asset that is suitable for your present stage of life.

There are many reasons a senior life settlement may be an ideal financial option for you. Recent Life Settlement Examples show you how a senior life settlement might fit your particular financial circumstances.

We understand selling your life insurance policy is an important financial decision and RTG Consultants works with you and your financial, legal, and insurance advisors to help you meet your present financial needs. Using a qualified Life Settlement Broker is the smartest move you can make during your life settlement process. Call 1-888-973-8377 to speak with a Life Settlement Specialist now.

Larger Reverse Mortgages Available to Seniors In 2006

WASHINGTON, DC – Older homeowners will be able to convert a greater portion of the equity in their homes into tax-free income using a reverse mortgage starting next year because of new, higher loan limits, the National Reverse Mortgage Lenders Association announced.

The increases will affect two reverse mortgage products: the federally insured Home Equity Conversion Mortgage (HECM), which accounts for 90 percent of all reverse mortgages made in the U.S., and the Fannie Mae Home Keeper loan.

The loan limits for the HECM product vary by geographic area. The highest of the loan limits—applicable generally to major metropolitan areas—will grow from $312,896 to $362,790. The lowest loan limit, which generally applies to rural and non-metropolitan areas, will grow from $172,632 to $200,160. HUD must first issue an FHA Mortgagee Letter before the new loan limits take effect. A letter should be forthcoming around the New Year.

Fannie Mae's national loan limit for single-family mortgages—which includes Home Keeper loans—will rise next year to $417,000 from the current limit of $359,650. The loan limit is 50 percent higher for Alaska, Hawaii, and the U.S. Virgin Islands.

“These increases in the loan limits for the HECM and Home Keeper products will enable seniors to access greater amounts of equity in their homes, providing a powerful tool for addressing their financial needs through retirement,” said Peter Bell, president of NRMLA.

Approximately 79.8 percent of the 3,226 counties (2,575) in the U.S. are currently at the HECM "floor." Only 104 counties, or 3.2 percent of the total, are at the current maximum loan limit. The balance are somewhere in between. While counties at the floor are guaranteed to rise from $172,632 to $200,160, there is no guaranty that counties at the current "ceiling," or in between the floor and ceiling, will rise immediately.

To view the current lending limit in your county, go online to https://entp.hud.gov/idapp/html/hicostlook.cfm.

A reverse mortgage is a unique loan that enables senior homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on new monthly mortgage payments.

Borrowers can choose to receive reverse mortgage funds as a lump sum, monthly income, or line of credit, or as a combination of these. Borrowers can use the funds for any purpose, including home repairs and improvements, medical expenses, in-home care, education, and supplemental retirement income. No mortgage payments are due during the life of the loan. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can never exceed the value of the home.

Source: AP

More Reverse Mortgage Information

Can't remember how many times I've been asked "What is a reverse mortgage"? Reverse mortgages are a great way to get a loan using your primary asset. As in all cases of financial lending, the flexibility comes at a price. A reverse mortgage is a loan using your house and is referred to as a "rising debt, falling equity" kind of deal.

To compare reverse mortgage to a more traditional one, the type of mortgage commonly used when buying a house can be classed as a "forward mortgage". To qualify for forward mortgage, you must have a steady source of income. Because the mortgage is secured by the asset, if you default on the payments, your house can be taken from you. As you pay off the house, your equity is the difference between the mortgage amount and how much you've paid. When the last mortgage payment is made, the house belongs to you.

On the other hand a reverse mortgage process doesn't require that the applicant have great credit, or even that they have a steady source of income. The major stipulation is that the house is owned by the applicant. Generally, there is also a minimum age required as well, the older the applicant, the higher the loan amount can be. As well, reverse mortgages must be the only debt against your house.

Differing from a conventional "forward mortgage", your debt increases along with your equity. Instead of making any monthly payments, the amount loaned has interest added to it - which eats away at your equity. If the loan is over a long period of time, when the mortgage comes due, there may be a large amount owed. Furthermore, if the price of your home decreased, there may not be any equity left over. On the flip side, if it was to increase, this could allow for an equity gain, but this isn't typical of the marketplace.

When deciding how to draw money from the reverse mortgage, there are a few options; a single lump sum, regular monthly advances, or a credit account. There are conditions in this kind of mortgage that would warrant the immediate repayment of the loan; the mortgage will be due when the borrower dies, sells the house, or moves out.

Failure to pay your property taxes or insurance on the home will undoubtedly lead to a default as well. The lender also has the option of paying for these obligations by reducing your advances to cover the expense. Make sure you read the loan documents carefully to make sure you understand all the conditions that can cause your loan to become due.

Learn about Life Settlements (Life Settlements and Viatical Settlements)

Life Settlements - Liquidate your life insurance policy and receive money you can use now. Eliminate premium payments and get the true value of your life insurance policy. Life Settlements (Senior Settlements) let you benefit now from unwanted or unaffordable life insurance policies. A Life Settlement Company make it possible through private services.

Viatical Settlements - If you or a family member are suffering from a terminal illness and have life insurance, there is money available now. You can redeem your life insurance policy for an amount greater than premiums already paid on the policy. This money can be used at your discretion to cover any needs or interests. A Viatical Settlement Company makes this possible for our clients by getting the most money available with one simple viatical application.

Pay off Mortgage Question

Q: Love your column and interesting answers. Now we have a question. My wife and I are both 88, happily married for 68 years with 11 grandchildren, 13 great-grandchildren and two great-great-grandchildren. We owe about $42,000 on our home mortgage at 7.75 percent interest. We can easily pay it off in full. Should we? There are pre-payment penalties, we know, but we are thinking that no mortgage would make no hassle for our children when we die. Should we pay off our mortgage?

A: Before you pay off your mortgage, please ask yourselves if you will have enough remaining liquid cash reserves. I wouldn’t want you to be “house rich, but cash poor.”

Fortunately, if you pay off the mortgage but then find yourselves “cash-challenged,” you can easily obtain a senior citizen reverse mortgage. However, the paperwork can often take several months.

The laws of most states regulate the amount of home loan prepayment penalties. Before you pay off your mortgage, ask your lender for the exact amount of your prepayment penalty. If you have had your mortgage for many years, you might be surprised to learn there is no prepayment penalty (which usually only applies for two to five years after a mortgage is originated).

By paying off your mortgage, you will be making a very wise investment at 7.75 percent in the form of interest savings. Where else can you make such a profitable investment?

P.S. If you want to save your children probate costs and delays after you both pass on, please consider putting your home and other major assets into a living trust.

Source: Bob Bruss

Senior Life Settlement

A Senior Life Settlement is quickly become an wonderful option in developing your financial planning strategy.

Now, seniors have a choice; senior life settlements are quickly gaining recognition as a solution for policy owners. A senior life settlement allows a policy owner to sell his/her unwanted, unaffordable or obsolete life insurance policy for an immediate lump sum of cash. Policies that would otherwise be seen as a non-performing asset can now be sold by policy owners.

Call 1-888-973-8377 to speak with a Senior Life Settlement Specialist.

Till next time, have a blessed day.....

Reverse Mortgage Internet

There is more and more Reverse Mortgage Information and education available on the Internet.

An example is describing how a reverse mortgage can increase income for qualified Seniors. The results are organized in a format easily understood and accessible to the market of “over-fifty” Internet users.

Visitors, both baby-boomers and retirees, use the site to evaluate their readiness for a lengthy retirement. After they complete a brief personal finance and retirement plan evaluation, the website presents them with alternatives to help improve long-term retirement income and security.

Call 1-888-973-8377 to see how a Reverse Mortgage can benefit your retirement planning.