A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

• all at once, in a single lump sum of cash;

• as a regular monthly cash advance;

• as a “creditline” account that lets you decide when and how much of your available cash is paid to you; or

• as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

Other Home Loans

To qualify for most home loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don’t have to make monthly repayments. So you don’t need a minimum amount of income to qualify for a reverse mortgage. You could have no income and still be able to get a reverse mortgage.

With most home loans, you could lose your home if you don’t make your monthly payments. But with a reverse mortgage, there aren’t any monthly repayments to make. So you can’t lose your home by not making them. Most reverse mortgages require no repayment for as long as you—or any co-owner(s)—live in the home. So they differ from other home loans in these important ways:

• you don’t need an income to qualify for a reverse mortgage; and

• you don’t have to make monthly repayments on a reverse mortgage.

“Forward” Mortgages

You can see how a reverse mortgage works by comparing it to a “forward” mortgage — the kind you use to buy a home. Both types of mortgages create debt against your home. And both affect how much equity or ownership value you have in your home. But they do so in opposite ways.

“Debt” is the amount of money you owe a lender. It includes cash advances made to you or for your benefit, plus interest. “Home equity” means the value of your home (what it would sell for) minus any debt against it. For example, if your home is worth $150,000 and you still owe $30,000 on your mortgage, your home equity is $120,000.

Falling Debt, Rising Equity

When you purchased your home, you probably made a small down payment and borrowed the rest of the money you needed to buy it. Then you paid back your traditional “forward” mortgage loan every month over many years. During that time:

• your debt decreased; and

• your home equity increased.

As you made each repayment, the amount you owed (your debt or “loan balance”) grew smaller. But your ownership value (your “equity”) grew larger. If you eventually made a final mortgage payment, you then owed nothing, and your home equity equaled the value of your home. In short, your forward mortgage was a “falling debt, rising equity” type of deal.

Rising Debt, Falling Equity

Reverse mortgages have a different purpose than forward mortgages do. With a forward mortgage, you use your income to repay debt, and this builds up equity in your home. But with a reverse mortgage, you are taking the equity out in cash. So with a reverse mortgage:

• your debt increases; and

• your home equity decreases.

It’s just the opposite, or reverse, of a forward mortgage. With a reverse mortgage, the lender sends you cash, and you make no repayments. So the amount you owe (your debt) gets larger as you get more and more cash and more interest is added to your loan balance. As your debt grows, your equity shrinks, unless your home’s value is growing at a high rate.

When a reverse mortgage becomes due and payable, you may owe a lot of money and your equity may be very small. If you have the loan for a long time, or if your home’s value decreases, there may not be any equity left at the end of the loan.

In short, a reverse mortgage is a “rising debt, falling equity” type of deal. But that is exactly what informed reverse mortgage borrowers want: to “spend down” their home equity while they live in their homes, without having to make monthly loan repayments. There’s more about this important concept in an article called “A ‘Rising Debt’ Loan” in the Basics section of this site.

Exception

Reverse mortgages don’t always have rising debt and falling equity. For example, if a home’s value grows rapidly, your equity could increase over time. But most home values don’t grow at consistently high rates, so the majority of reverse mortgages end up being “rising debt, falling equity” loans.

AARP does not endorse any reverse mortgage lender or product.

Visit us at www.allwestmortgage.com if you would like more information from a Reverse Mortgage Specialist.

]]> http://myeldercareblog.com/allwestmortgage/146/a-new-kind-of-loan-for-seniors-in-north-hollywood-ca-in-reverse/feed/ 0 http://myeldercareblog.com/allwestmortgage/131/types-of-reverse-mortgage-for-seniors-in-los-angeles/ http://myeldercareblog.com/allwestmortgage/131/types-of-reverse-mortgage-for-seniors-in-los-angeles/#comments Fri, 25 Dec 2009 16:14:05 +0000 Philip http://myeldercareblog.com/allwestmortgage/?p=131

Reverse Mortgage Types

For article source, click here

By Dennis Estrada

The reverse mortgage helps the seniors over sixty two years old to use the equity of the home to supplement an existing income. Reverse mortgage is loan advance to the home without repayment unless the owner moves, dies, or sells the home.

In the United Kingdom, reverse mortgage is more common as lifetime mortgage. Hence, the owner never needs to repay as long as the owner lives in the home. The reverse mortgage lenders distribute the cash as lump sum, regular payment, credit line, or combinations.

In the United States, the basic types of reverse mortgage are single purpose reverse mortgage, federally insured reverse mortgage, and proprietary reverse mortgage. There may be more types in different countries, but the main idea is very similar.

Single Purpose Reverse Mortgage

The government agencies and non profit organizations offer this type of reverse mortgage. It is generally low costs. Although the government agencies may be local or state, the mortgage is available in a few locations only. The purpose of reverse mortgage is specific such as home repair, home improvements, and property taxes. And, the owner earns low or moderate income.

Federally Insured Reverse Mortgage

The U.S. Department of Housing and Urban Development (HUD) backs this type of reverse mortgage. This type is more commonly known as Home Equity Conversion Mortgages (HECM). The upfront costs are high especially if the owner stays in short period of time. So, this reverse mortgage is costlier than Single Purpose Reverse Mortgage.

It is the opposite of Single Purpose Reverse Mortgage in which the reverse mortgage loan can be used in any purpose. And, the mortgage are widely available anywhere. There are also no income or medical requirements.

Proprietary Reverse Mortgage

The private companies backed or owned this type of reverse mortgage. It is generally the most expensive type of reverse mortgage. However, the owner may get more than other types of reverse mortgage. Generally, it works the same way as the Federally Insured Reverse Mortgage.

For questions or more information regarding Reverse Mortgages, please click here!

The Home Equity Conversion Mortgage (HECM) program can send you a reverse mortgage loan advance every month. But the amount of this cash payment to you doesn’t change over time, so it buys less in the future as prices increase with inflation.

You can choose to have monthly HECM advances paid to you:

• for a specific number of years that you select (a “term” plan); or

• for as long as you live in your home (a “tenure” plan).

A term plan gives you more money each month than a tenure plan does. The shorter the term, the bigger the advances can be. But the advances only run for the amount of time you choose. While you don’t have to repay the loan when the term ends, you don’t receive monthly checks past the end of the time you select.

Monthly Advance Examples

The HECM program lets you combine a monthly advance with creditline, a lump sum of cash at closing, or some of each. This table shows some of the combinations that could be selected by a 75-year-old Jane Simler living in a $250,000 home with a loan at 7% expected interest, a $35 monthly servicing fee, closing costs of $2,500, and the  maximum origination fee allowed by HUD.

For example, if Jane selects a $25,000 lump sum and a $50,000 creditline, she also could get any one of the following: a monthly advance of $440 for as long as she lives in her home, $557 each month for 15 years, $713 each month for 10 years, or $1,204 monthly for 5 years. This table shows:

• if you take more money as a lump sum or creditline, the monthly advances are smaller; and

• if you select a shorter term of monthly advances, the amount of each advance is bigger.

Monthly Advances Only

The problem? Putting all of your loan funds into a monthly advance reduces your financial flexibility, especially if you don’t have much in savings. Remember, monthly advances are fixed. So their purchasing power decreases with inflation.

Adding a growing creditline to your monthly advance gives you a hedge against rising prices and gives you ready cash for unexpected expenses. If you are interested in a monthly advance, it’s usually a good idea to add a creditline as well.

On the other hand, for a $20 fee, you can change your payment plan at any time. For example, you could add a creditline to a monthly advance, although this would reduce the amount of the monthly advance. You could also convert part or all of a creditline into a monthly advance.

AARP does not endorse any reverse mortgage lender or product.

Visit us at www.allwestmortgage.com for a Reverse Mortgage Expert in your area!

http://seniordailyliving.com/Articles/PersonalFinance/TenWays.html

By Cynthia Barnett

If you’re like most folks, you have your doubts about retiring. On one hand you may be elated. On the other hand, you may be a bit frustrated because you have no idea what the future entails. We’ll, we’re here to tell you that shifting gears from a working professional to a successful retiree can be easy. In fact, we consider it like simply shifting gears to a different lifestyle and being open to redefining yourselves. It is not about giving up. It is about undergoing a career transformation, maintaining your professional and personal identity and taking control of your life. It is about being productive, not losing touch with that inner you that makes you special.

In this article, we’ll discuss ten proven ways that you can use to redefine yourself and transition into the initial phase of retirement. These ten tips will help you adapt positively to your post-retirement years and are as follows:

1. Partial disengagement – In order to transition smoothly, you must partially disengage yourself from your full time working life. This isn’t to say that you must go cold turkey. Instead, you have to develop a different mindset that retirement, although a time for change, is a period of new growth and a time for self fulfillment. At this point, many go from full time to part time and some go from full time to no work at all. Trust your instincts and go with what you feel works for you.

2. Changing our image – You must change your internal image about what your career means. After all, don’t focus on ‘What am I to do now that I’m retired?” instead think “What will I become once I’m refocused and retired?” Therefore, you have to change your perception and realize that you can succeed as a retiree if you believe that you can.

3. Appreciating ourselves – Remember that you’re a unique individual and you need to celebrate this fact, every single day! Your personal worth is far beyond the work you did in the past. You have so much to give and contribute to the world and retirement is the perfect time to let your “inner light shine” and let this light shine as far as you can see.

4. Staying connected – You should be committed to interacting with people with whom you have a common interest. Finding such people can be done by improving your social life to include more people, places and things. Make it a point to get to know people with similar interests as yours. Join clubs and groups, participate in activities, and have a great time.

5. Remain active – Do not think of retirement as only a period of rest and relaxation. Times have changed, and so has the concept of retirement. Being inactive is “OK” if this is all that you want to do. This is about you. Some people take a period of a few months to a year to just cool out and relax before moving on into a more active life. Whether you decide to be “active” or “inactive” and how long, it is totally up to you. You know yourself better than anyone else and you must do whatever makes you happy.

6. Consider your options– Consider your many available options. Whether you ‘ease’ into retirement, take a course at a college, or work some part time job or pursue a volunteer position, do what you want to do and let no one tell you what you need to do while in retirement. This is your personal time and you are in control of your life.

7. Increase our knowledge – There is no end to educating yourselves. As long as you’ve got breath in your body, you should increase your knowledge base. After all, learning is a lifelong process and there are many things that you can do to increase your knowledge and in the process share your knowledge with others. For instance, you can learn computers. You can learn how they operate, how to fix them, and many other things. The possibilities are endless.

8. Explore Your Dreams – Retirement is a perfect time to fulfill your dreams, especially now that you have some time to devote primarily to your needs. Take some time and really think about what you want to accomplish in life and then make those dreams a reality!

9. Join a Cause – Retirement does not mean that you are worthless. To derive a feeling of self worth and fulfillment, commit yourself to a worthy cause that you truly believe in. For instance, you might chose to help people become aware of the devastation of HIV or breast cancer.

10. Maintaining youthful attitude – Retirement from a job does not mean that you give up everything and retire to ‘watering plants’. Just because you are s0 does not mean you have to act your age! It is the attitude that counts.

Redefining yourself after retirement is not as difficult as you might imagine. By maintaining a youthful attitude, joining a cause, exploring your dreams, increasing your knowledge, considering your options, remaining active, staying connected, appreciating ourselves, changing your image and partially disengaging from work force, you can redefine yourself.

Visit us at www.allwestmortgage.com to see if a reverse mortgage can help with your retirement plan!

The Department of Veterans Affairs provides three types of long term care services for veterans.

The first are health care benefits provided to veterans who have service-connected disabilities, who are receiving VA Pension or who are considered low income. These services include free medical care, possible free prescription drugs, orthotics and prosthetics, home renovation grants for disabilities, home care, assisted living, domiciliary care, nursing home care, and a possible host of other services or benefits.

The second benefit is state veterans homes. The majority of these homes offer nursing care but some may offer assisted living or domiciliary care. The Department of Veterans Affairs in conjunction with the states helps build and support state veterans homes. Money is provided to help with construction and a federal subsidy of $72.71 a day is provided for each veteran using state veterans nursing home services. These homes are generally available for most veterans and sometimes their spouses and in some cases for so-called “Goldstar parents.” Veterans homes are run by the states, sometimes with the help of contract management. There may be waiting lists in some states.

The third benefit for veterans is disability income programs. The most familiar of these benefits is an income for service-connected disabled veterans called “Compensation.”  The least known of these is a program officially called “Pension” but popularly known as the “aid and attendance benefit.”

…. read the entire article by going to the link below

Please go to the following URL for the entire article and previous articles: Either click on the link   http://www.planforcare.org or copy and paste the following into your browser:     http://www.planforcare.org

Visit us at www.allwestmortgage.com if you have questions, or would like to see how a reverse mortgage can help you pay for your eldercare needs.

* the bursting of the housing bubble;
* the stock market crash; and
* the ongoing rise in Social Security’s Full Retirement Age

The Index results from comparing households’ projected replacement rates – retirement income as a percent of pre-retirement income – with target rates that would allow them to maintain their living standard.

Even if half of today’s household work until they turn 65, the NRRI shows that in 2009, half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living.

As the study says, ensuring retirement security for an aging population is one of the most compelling challenges facing the nation.

The National Retirement Risk Index: After the Crash

Visit us at www.allwestmortgage.com if you need help in the Los Angeles, CA area.

You may not be aware of this, but reverse mortgages are the safest kinds of mortgages available today.  In addition, they are among some of the most beneficial senior financial products ever produced.  What makes this true?  It was not always the case, but since it was highlighted by the federal government, they were able to spot the dangers for senior citizens and put a stop to the possibility of them being taken advantage of.  The hazards initially present in this kind of mortgage were removed, and now the FHA and HUD have closing costs, interest rates and fees with set limits.  On top of these steps to properly regulate reverse mortgages, the qualifications that banks must meet to provide them are set so high that only a few lenders have taken the necessary measures in order to offer reverse mortgages.  This means that your reverse mortgage will remain in force and be secure for your entire lifetime if you take the correct steps to establish it.

Another great advantage is that reverse mortgages allow you to make use of the appreciation in your home’s value.  The standard way to utilize the equity that has been building on your home is to sell it and move.  What if you do not want to move?  Reverse mortgages, which have been designed specifically for senior citizens, give you a way to access the equity on your home without the risk of making monthly payments.  This is great for avoiding a financial predicament in your later years of life.

With reverse mortgages, you can remove 50 to 60 percent of the appraised value of your home without making monthly payments.  There are multiple ways you can extract the cash, including as a lump sum, a direct line of credit or as a monthly payment.  Effectively, the money your home appreciates can serve as a form of income for you and your household.  What a perfect solution to your depleting retirement fund!

How is interest calculated on a reverse mortgage?

Interest on a reverse mortgage is calculated based on the money paid out to you. In general, reverse mortgages have variable rates, though fixed rate reverse mortgages are becoming more popular. Variable rate reverse mortgages are based on certain indexes. Interest is not covered by the proceeds you get from a reverse mortgage – it builds up over the course of the entire loan until it’s repaid.

Does a reverse mortgage affect tax liability?

Reverse mortgages are not counted as standard income, but they may still be partially taxable. The IRS sometimes provide tax breaks for interest paid toward loans, but no interest is paid on reverse mortgages until the loan ends. Thus, this is not a concern until then. The insurance premium that is required to take out a reverse mortgage can be deducted from your taxes for that year.

How do reverse mortgages work with existing mortgages?

Reverse mortgages must be the primary liens on a property, which means that all other debts must be paid off when the loan is taken out. You can use the proceeds from the reverse mortgage to pay off your regular mortgage or other debts so that the reverse mortgage becomes the primary lien. This frees you from making monthly payments which can make it easier to make ends meet.

How do reverse mortgages interact with government assistance programs?

Some people worry that taking out a reverse mortgage will disqualify them from getting social security or other benefits from the government, but this is not the case. The only benefit that may be affected is Medicaid, which is based on how much money you have available. If you spend the money from a reverse mortgage immediately, it will have no effect. If you keep some money, however, it counts as an asset and may disqualify you from Medicaid.

Where can I learn more about reverse mortgages?

There are counseling sessions that are required in order to take out certain types of reverse mortgages. These counseling sessions are designed to ensure that you fully understand the responsibilities and repercussions of taking out this sort of loan. At the end of the session, you’ll be given a certificate that confirms you understand how reverse mortgages work.

What is a reverse mortgage?

A reverse mortgage is a special type of mortgage that’s only available to people ages 62 and older.  In a normal mortgage, a bank or other financial institution provides a loan to help a person or family buy a home, and the borrower pays back money each month. With a reverse mortgage, money is taken out against a home and paid to the borrower in one lump sum or in monthly payments.

How is a reverse mortgage paid back?

All payments on a reverse mortgage are deferred until the borrower dies, leaves their home or sells their home. Then, many different things can happen. If the home is sold, then the proceeds from the sale can be applied against the reverse mortgage. If the proceeds aren’t enough to cover the cost of the loan, then the lending institution pays the rest. If the proceeds exceed the amount of loan, then the extra moneys goes to the borrower. In the case of the borrower’s death, the borrower’s heirs can either refinance the house or sell it under the same conditions outlined above.

What can the money from a reverse mortgage be used for?

Money from a reverse mortgage can be used for anything at all. Most often, people take out reverse mortgages to supplement a dwindling retirement account. However, one might also take out a reverse mortgage to pursue a lifelong dream or spend some time traveling before settling down for good. Reverse mortgage funds might also be used for home repairs or even to prevent a bank from foreclosing on a home.

How do I qualify for a reverse mortgage?

Most standard types of homes qualify for reverse mortgages. Single family homes, properties with 2-4 units, condos, townhomes, and manufactured homes can all work for reverse mortgages. In some cases, you may even be able to take out a reverse mortgage on a home that still has a traditional mortgage. There are no special requirements for borrowers in terms of medical health or personal income.

How much money can you get from a reverse mortgage?

The amount of money that can be received from a reverse mortgage is dependent on the age of the homeowners, the value of the home, and the current interest rates. The general rule is that the more one’s home is worth and the older they are, the more money they can get. The money can be paid in any number of ways, including monthly payments, a single lump sum, and a flexible line of credit.

Visit us at www.allwestmortgage.com if you have questions, or need help with a reverse mortgage in the Los Angeles, CA area.

With fund cuts looming, it is important to find alternative sources for funding long term care for an aging loved one.  Reverse Mortgages are a great way to procure the necessary monies to secure the future of our seniors.  Visit me at www.allwestmortgage.com for help with a Reverse Mortgage in the area.

Continue reading HERE.