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Seniors consider reverse mortgage
SPRING HILL - The Martins had plenty of money in the bank. Or so they thought.
Robert Martin got cancer, and the bills started to pile up. Insurance helped with much of the costs associated with Robert's treatment, but some still fell to the septuagenarian couple.
As savings depleted, the worries grew.
"It's just overwhelming," Dorothy Martin said. "I'm at the point where I have to do something. We've taken money out of this and that."
Martin, accompanied by her grandson Tim, was one of roughly 80 seniors who attended a free seminar on reverse mortgages Monday at Spring Hill United Church of Christ.
County Commission Chairwoman Diane Rowden organized the seminar with help from Spring Hill resident Joe Tomaselli, a columnist for Hernando Today.
Tomaselli and his wife Rita told County Commission Chairwoman Diane Rowden about how a reverse mortgage helped the couple come up with cash when they realized they were dipping too far into their savings to live.
"You'll be amazed at the amount of problems it can solve," Joe Tomaselli told the crowd in his introduction.
"In Hernando County, we have so many people who are land rich and cash poor," Rowden told the attendees. "There is some help here if this is the answer for you."
Rowden invited Shirley Stone, regional vice-president of American Reverse Mortgage Corp., to lead the seminar. The company, headquartered in Ocala, brokered the Tomasellis' reverse mortgage.
Reverse mortgages are loans taken out on home equity. They are designed specifically for seniors 62 years and older to use that equity to come up with cash for everything from medical bills to vacations.
Reverse mortgages differ from the traditional home equity loan in that the borrower is not required to repay the loan until the last surviving borrower leaves the home. The borrower retains ownership of his home.
"The walls of your home are like Fort Knox," Stone told the crowd. "The money is there. We just have to learn how to get to it when we're ready."
There are no income or credit requirements, but homeowners must pay their property taxes and homeowners insurance, keep the home in good repair and live in the home as their permanent residence.
All reverse mortgages are due when the last borrower dies, sells the home or permanently moves out.
If the borrower dies, the home goes to his estate. The borrower's heirs have the choice of keeping the home and paying back the lender or selling the home to pay off the balance of the reverse mortgage. Any remaining equity remains with the estate.
The older the borrower and the more valuable the home, the more cash the borrower can get. Borrowers can get their cash in a lump sum, in regular monthly payments, through a growing line of credit or a combination of the three.
Stone said the most popular form of reverse mortgage is the Federal Housing Administration Home Equity Conversion Mortgage, which is insured by the federal government.
For their part, the lender gets 2 percent of the appraised value of the home, and the broker gets a percentage of that 2 percent. There also are state and county closing costs associated with the mortgages, which are typically the same as a regular mortgage and can also be financed into the loan.
All these fees are incorporated into the mortgage and paid at the end of the loan.
More and more seniors are taking advantage of reverse mortgages today, especially since recent action by Congress that locks in the interest rate at the time the loan is processed and lifted the cap on the amount of reverse mortgages that can be given in the country each year, Stone said.
On Monday, the interest rate for a reverse mortgage was 5.91 percent.
At that rate, a 65-year-old borrowing on a home appraised at $145,000 could get a loan of $73,000, Stone said. A 73-year-old on the same home could get $84,200.
Several attendees wanted to know if a reverse mortgage would affect benefits such as Social Security, Medicare or veteran's benefits, or whether borrowers get hit with the capital gains tax.
The answer is no, because reverse mortgages are considered loans, not taxable income, Stone said.
"You're borrowing your own money, folks," she said.
A public service, not an endorsement
Both Tomaselli and Rowden told the attendees that they were not personally benefiting by putting on the seminar.
"One thing I want to get across is that I'm not here pushing anything on you," Rowden said. "I think it's important for you to have all the information available."
Representatives with Reverse American had attendees fill out a yellow card with their name, address and phone number for a free drawing for a meal at a local restaurant.
Stone said the information would not be used to call the person unless they specifically asked to be contacted.
Rowden said that she welcomed other reverse mortgage brokers to attend the seminar.
Several did, including Lynette Ball, a reverse mortgage specialist with TransLand Financial Services in Weeki Wachee.
Ball said she came mainly to make sure that the seminar offered correct information. Stone did a good job, she said, but she added that she wished Rowden had contacted a local company to conduct the seminar.
"These are my people and I care about them," said Ball, who waited in the foyer after the meeting to hand out business cards.
Rowden told a reporter after the seminar that her involvement in organizing the event should not be seen as a county endorsement of reverse mortgages or of any specific mortgage broker. Rather, she sees it as part of her duty as a commissioner.
"I'm a public servant and I just wanted to help provide information," Rowden said. "I think we need to do more of this in the county."
Source: Hernando Today
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