What Does It Cost To Apply For A Reverse Mortgage
Before closing on a proprietary reverse mortgage under New Yorks Real Property Law Section 280 or 280-a, the only charges a lender may collect from a borrower before closing are an application fee, an appraisal fee, and a credit report fee. That application fee must be designated as such and may not be a percentage of the principal amount of the reverse mortgage or of the amount financed. For a HECM loan, there generally is no separate application fee as that fee is include in the origination fee collected at closing.
The Problem With Getting A Reverse Mortgage On A Condo
With FHA spot approval a distant memory, originators struggle to help condo owners secure a HECM
Ever since the Federal Housing Administration eliminated spot approvals for condominiums, reverse mortgage originators have logged countless hours helping prospective borrowers secure a HECM on their condo sometimes to no avail.
And, with the Department of Housing and Urban Developmentdragging its feet for the past two years on finalizing rules that would bring back spot approval for FHA loans, things might not change anytime soon.
Under current FHA policy, the only way to obtain a HECM on a condominium is to get FHA approval of the entire complex, a process that requires a good deal of documentation, including proof of adequate insurance, confirmation that no one individual owns more than 10% of the complex, evidence of sufficient cash reserves, and verification that at least 50% of the units are owner-occupied.
For HECM originators, the task of helping a condo owner get a reverse often comes with the added hassle of obtaining FHA approval of the entire complex, which some associations are unwilling to do.
When Im talking to a potential borrower and I find out that theyve got a condo, I say a little prayer and hope to God that theyre approved, but usually theyre not, said Philip Lipp of Allwest Mortgage in Valley Village, California.
Luddy also said he often encounters resistance from condo associations.
Working Out If A Reverse Mortgage Is Right For You
It’s true reverse mortgages don’t have a stellar reputation and Gilbert says they aren’t right for everyone, for example, someone who is definitely not planning on remaining in their home for the foreseeable future and anyone for whom that property is needed by the family, for example if you have a child with a disability and want the child to stay in the apartment long-term.
However, Gilbert says she has seen cases where a senior child over the age of 62 and a parent have gone in on a reverse mortgage together and says “that allowed tremendous protections for both generations.”
Changes to the mortgage industry over the past decade have contributed to making reverse mortgages safer, Gilbert says. For starters, a financial assessment must be carried out to ensure you have enough money for the ongoing costs of the property.
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How Can I Get A Reverse Mortgage On My Condo
Many seniors find themselves unprepared to comfortably finance the retirement theyve envisioned. Increased medical bills, basic living expenses, and unexpected retirement taxes all pose significant financial burdens on a limited income. In fact, the number of Americans age 62 and up who face severe housing cost burdensdefined as spending at least 50% of monthly income on housingrose from 1.5 to 1.9 million between 2013 and 2015.
Using HUDs data, that means as many as 400,000 more seniors now face financial hardship in the United States during the time in which they should be able to live their lives to the fullest following their working career. With their newfound freedom, senior adults should be able to pursue retirement hobbies and spend more time traveling without worrying about a tight budget.
There are many financial resources for seniors struggling to get by, including the government-sponsored HECM program. Some reverse mortgage benefits include:
- The ability to pay off an existing mortgage
- Supplement a fixed retirement income
- Payoff other outstanding debts
- Afford large purchases
- Age independently at home
Borrowers have the choice in how they wish to receive their loan proceeds, either as a lump sum, line of credit, or monthly installments. This may significantly increase your retirement income, allowing you to afford your living expenses more easily or pursue retirement travel with less stress.
I Have A Reverse Mortgage And I No Longer Wish To Live In My Home What Should I Do
Living in the mortgaged property as your primary residence is a condition of any reverse mortgage loan. If you no longer wish to live in your home or doing so is no longer possible, you should speak to your lender/servicer as soon as possible to discuss your options. You should also speak to an attorney or housing counselor. To locate a free housing counselor in your area, please visit the Departments website.
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How Do We Do This With The Chip Reverse Mortgage Advantage
The CHIP Reverse Mortgage has some key advantages compared to other avenues you might be exploring.
A CHIP Reverse Mortgage can be used to buy a cottage
Unlike the CHIP Reverse Mortgage, a HELOC must be serviced monthly, which can eat into your income and cause undue stress. In addition, more and more retirees are actually being turned down for a Home Equity Line Of Credit as banks are less inclined to lend to those without a fixed income.
The CHIP Reverse Mortgage was designed for seniors 55 and older, with an approval process that doesnt discriminate against retirees. Cottage properties are in high demand as people are staying close to home. The CHIP Reverse Mortgage can be an easy way to help you purchase a cottage, enjoy the retirement you have worked so hard for.
Isnt it time your home started paying you back?
If youd like to find out more, please contact me with no obligation on your part, and lets see if a Reverse Mortgage fits into your retirement plans.
Who is not eligible for a reverse mortgage?
You are not eligible for a reverse mortgage if you do not meet the minimum age requirement of 55 years of age, and if you do not own your principle residence with a fair amount of equity in it you will not be eligible for reverse mortgage. It doesnt mean you wont ever be eligible just means at this current time you are not eligible.
What Do I Need To See A Mortgage Advisor?
Fha Guidelines For Condo Reverse Mortgages
- Structural soundness
- Absence of hazards
Property inspections include an Individual Condominium Unit Appraisal Report, which is an appraisal form specifically created to assess condominiums.
Many discrepancies or required repairs can be easily rectified, but until 2019, it was challenging to obtain an FHA loan on a condo due to restrictive lending policies. In fact, out of the 150,000+ condo projects across the country, only 6.5% are approved for FHA lending.
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Which Reverse Mortgage Is Right For Me
By Special to MoneySense on September 8, 2021
Two lenders in Canada offer reverse mortgagesand while their offerings are similar in many ways, there are key differences you should understand if youre considering one. How much can you borrow? What rates do they charge? Can you pay back the loan at any time? Read on for answers.
When Vancouver condo owners Maggie and Rob found out they were on the hook for $400,000 in improvement costs to their building and unit as required by an assessment from their Strata Council, they werent sure what to do.
The couple, who are in their early 80s and mortgage-free, have lived in the large upscale Kitsilano condo for the past 20 years and were not anticipating a financial obligation of this magnitude during retirement. So the results of an assessment from their Strata Council, which requires them and other unit owners to find six-figure sums in short order, came as a shock. While they have about a half-million dollars in investments they could use to cover the improvement costs, liquidating those assets would come with a serious tax hit. And their income isnt high enough to qualify for a home equity line of credit or mortgage refinance.
Then their daughter suggested a reverse mortgage, a type of borrowing that allows owners age 55 or older to borrow up to 55% of the equity in their property, without the need to make any payments for as long as they live in the home.
When Will The New Loans Be Available
Currently, borrowers with very high home values can access at least one non-FHA reverse mortgage option.
Several additional lenders, however, have said they will be offering private reverse mortgage products in 2014.
If you are seeking a reverse mortgage, keep in mind that the HECM is just one type of reverse mortgage.
It can help retirees to boost cash flow, protect against market risk, or simply provide a line of credit for emergency uses in retirement. But there are other options that may also be worth exploring.
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How Do You Pay Back A Reverse Mortgage
The most common method of repayment is by selling the home, where proceeds from the sale are then used to repay the reverse mortgage loan in full. Either you or your heirs would typically take responsibility for the transaction and receive any remaining equity in the home after the reverse mortgage loan is repaid.
A Wise Move Under The Right Circumstances
Refinancing a reverse mortgage can be a wise move for seniors who fit the criteria.
A refinance can pay off your existing reverse mortgage and possibly provide you with a lump sum or monthly payment tapped from available additional equity money that can come in handy as you age, Fleysher said.
However, be sure to inspect your reverse mortgage loan documents to learn if there are any fees related to prepayment, and check with your refinancing lender or agent regarding closing costs involved, he recommended.
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Consider Reverse Mortgage Prepayment Charges
At both banks, there are no penalty fees to discharge the mortgage when the last borrower dies and if the last borrower must move to long-term care, 50% of the penalty is waived.
But Maggie and Rob also want the option to pay down their reverse mortgage at any time , especially if the stock market and their investments perform better than anticipated. While both Equitable Bank and HEB charge prepayment fees, the way they calculate those charges are quite different, especially in the first three years.
HEB calculates the fee as a percentage of the entire loan , while Equitable Banks charges are based on monthly interest . After three years, both banks charge three months interest. However, because Equitable Bank has lower interest rates, their prepayment fees are still lower.
We realize that clients might have a change in strategy or something may come up, says von Martels. We dont want them to feel that the fee for exiting the mortgage is too exorbitant if they decide in the first few years that its not right for them.
Heres what the prepayment charges would look like for Maggie and Rob in the first five years, assuming they go with a five-year fixed rate.
| $10,765 |
Reverse Mortgages Your Spouse And Heirs
Both spouses have to consent to the loan, but both dont have to be borrowers, and this arrangement can create problems. If two spouses live together in a home but only one spouse is named as the borrower on the reverse mortgage, the other spouse is at risk of losing the home if the borrowing spouse dies first. A reverse mortgage must be repaid when the borrower dies, and its usually repaid by selling the house. If the surviving spouse wants to keep the home, the mortgage loan will have to be repaid through other means, possibly through an expensive refinance.
Only one spouse might be a borrower if only one spouse holds title to the house, perhaps because it was inherited or because its ownership predates the marriage. Ideally, both spouses will hold title and both will be borrowers on the reverse mortgage so that when the first spouse dies, the other continues to have access to the reverse mortgage proceeds and can continue living in the house until death. The nonborrowing spouse could even lose the home if the borrowing spouse had to move into an assisted living facility or nursing home for a year or longer.
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Can A Reverse Mortgage Be Refinanced
Just as with a traditional mortgage loan, a reverse mortgage can be refinanced if you choose: provided you qualify for the refinance.
Borrowers can refinance their reverse mortgage into a new one to take advantage of better terms, lower rates, and more preferred conditions of a new loan, said Joe DeMarkey, director of the Washington, D.C.-based National Reverse Mortgage Lenders Association.
However, you have to wait at least 18 months from the closing date of your original reverse mortgage to refinance, he cautioned.
You also have to be able to pay off the entire balance owed on your existing reverse mortgage, said Emil Fleysher, a real estate attorney in Deerfield Beach, Fla. That means you must qualify for a refinance loan large enough to cover the existing loan.
Just because you are eligible to refinance a reverse mortgage or stand to benefit doesnt necessarily mean you should, said Andrew Latham, a personal finance counselor/financial analyst in Raleigh, N.C.
Refinancing a reverse mortgage can include substantial fees, so its important to run the numbers before deciding.
Andrew Latham
You need to meet three rules to qualify for a reverse mortgage refinance, as well.
The home must continue to be your primary residence as well. So if you own this home and a second home at the beach, you must continue living in the current property for most of the year to be able to refinance the reverse mortgage on it.
Can You Refinance A Reverse Mortgage Loan
A reverse mortgage provides flexibility to older homeowners, allowing them to convert their home equity into cash.
The biggest advantage of a reverse mortgage is that making monthly payments is optional, as long as you keep your property taxes, insurance, and upkeep current. The loan can even pay you each month. The loan balance only comes due when the last borrower dies or leaves the home.
Taking out a reverse mortgage early homeowners become eligible once they turn 62 can help boost retirement savings, and maximize the benefits via a guaranteed-to-grow line of credit on any unused funds.
But what if you take out a reverse mortgage, only to see interest rates drop a few years down the road? Are you stuck with the higher rate?
Not necessarily. You can refinance a reverse mortgage, just as you can a traditional mortgage. A reverse mortgage refinance can be the right move if interest rates dropped, your home has appreciated significantly in value, or you want to add your spouse to the loan.
But there are pros and cons to refinancing a reverse mortgage. Learn whats involved, including the related fees and steps required.
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The Oversight Role Of A Co
In arguing for co-op owners to be allowed to access reverse mortgages, Luxemburg says the board has a crucial oversight role. “The board in that case is a check on a senior citizen living in a building being abused by an improper reverse mortgage because the board can look at the mortgage and say, ‘this is not right.'”
Gilbert says she’s seen an uptick in interest in these products over the past year.
“There’s always been a desire to remain in your own home so when you look at the pandemic and the additional risks that people have had to incur when they could not stay in their own homeshow scary is that?” she asks.
How Do You Qualify For A Reverse Mortgage
You need to be a Canadian homeowner and at least 55 years of age. The amount you will receive will depend on your age , the location of the home to be mortgaged and its value.
The maximum you will receive is 55% of your homes value on average the older you are, the more you will get.
Check out the new purchase mortgage rates for the CHIP Reverse Mortgage® here. Remember though, regardless of the new purchase mortgage rates, with CHIP you dont have to make any regular mortgage payments.
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My Will States That My Home Goes To My Daughter When I Die What Effect Will Taking Out A Reverse Mortgage Have On That Provision
A reverse mortgage will become due upon the death of the last borrower. Your daughter will be given an opportunity to pay of the balance of the reverse mortgage. However, if the balance of the loan is not paid off, the property will go into foreclosure and eventually be auctioned off. The proceeds of the auction will go toward paying off the loan balance. New York is a non-recourse state, which means that even if the proceeds from the sale of the home do not cover the loan balance, your lender cannot go after you or your estate for the remaining loan balance. If, on the other hand, there is money left over after the loan is paid off, your heirs will be given an opportunity to claim the surplus.
