REVERSE MORTGAGE INFORMATION

National Reverse Mortgage Education Center

Our mission is to be the prominent reverse mortgage educational resource for lenders , homeowners and other professionals. We intend to accomplish this through the support of our sponsors, and participation by members of the reverse mortgage community and related industries in the development of quality educational courses and materials, made available free of charge. With our open forum, proven personal experiences and expertise may be shared to enhance the professionalism of our great industry and to better meet the challenges that lie ahead.

Reverse Mortgage Calculator

The reverse mortgage calculator was designed to calculate the net benefit amount of a reverse mortgage loan. The amount of funds available to a homeowner are based on the youngest borrowers age, current rates, and the property value. Seniors have a choice of either a fixed interest rate or variable rate which gives greater flexibility in choosing how to use the funds.

HECM Saver

HUD had been discussing a new variation of the HECM (pronounced "Heck-um") program for quite a while and they finally announced some of the particulars. The program, which they have decided to call the HECM SAVER will be a limited version of the regular HECM reverse mortgage that HUD has had in place that will now be referred to as the HECM Standard. The new HECM Saver is intended for borrowers who do not intend to borrower the full amount of funds available to them under the HECM Standard program and as a result, will receive lower up-front mortgage insurance fees for the lower risk to HUD.

Reverse Mortgages can be a Life-Changing Event

More than 42 percent of all retirees will have significantly less income at age 80 than they did at age 67, according to a study by the Urban Institute. At the same time, Retirees have a number of options to ensure they have sufficient income including a reverse mortgage. Two life-changing events, such as the death of a spouse or the onset of poor health, can decrease the wealth and income that, at the time of retirement, may have seemed sufficient to last a lifetime.

The largest decline in wealth and income among retirees occurs for those who become widowed or divorced: median wealth declines as much as 44 percent, income falls by a staggering 37 percent, and 33 percent fall below or near the poverty level. A decline in health can have a severe impact on the economic well-being and security for retirees. Almost 30 percent of those between the ages of 67 and 80 will experience the onset of poor health, which will decrease their wealth by 38 percent and their income by 13 percent.

The study concludes that current retirees who experience a life-changing event will have a $16,000 drop in their yearly income. Unfortunately, these retirees are still faced with the rising cost of living, putting their financial future at risk.

So, what can you or someone you care for do? Here are three options to consider:

1. Contact the Area Agency on Aging (AAA) to discover what kind of programs and assistance are available to you. AAA’s nationwide toll-free number is 800-677-1116.

2. Contact the Social Security Administration (SSA) to see if you qualify for Supplemental Security Income (SSI) to meet your basic needs. SSA’s nationwide toll-free number is 800-772-1213.

3. Take out a reverse mortgage.

A reverse mortgage loan enables homeowners 62 and older to convert the equity in their home into cash for any purpose. The best part is that there is no repayment for as long as the homeowners live in their home. Credit and income are not used to qualify, and Social Security and Medicare benefits are not affected.

When the homeowners no longer live in their home, the reverse mortgage is typically repaid from the sale of the home. There is no debt left to heirs since the lender can only look to the property for repayment. Reverse mortgages are growing in popularity as public awareness increases and associated costs continue to decrease.

The Department of Housing and Urban Development (HUD) recently approved a single national loan limit of $625,500 from the previous limits ranging by county from $200,160 to $362,790. This new higher loan limit is expected to increase the number of retirees who qualify for a reverse mortgage, and to enable existing reverse mortgage borrowers to refinance their reverse mortgage to receive more money from their home.

“We have worked with many widows and widowers to replace the income lost when their spouse passed away. With a number of reverse mortgage programs and pay out plans to choose from, we are able to provide the flexibility to meet the needs of our senior customers and to supplement their retirement income so they may be financially independent and secure for life.

You may also receive a free copy of AARP’s publication “Home Made Money, A Consumer’s Guide to Reverse Mortgages” by calling 800-209-8085. So, the good news is that retirees now have many options available to assist in realizing a more comfortable retirement free from dependence, want, and deprivation.

Retirees at Greater Risk from Inflation: Reverse Mortgages May Help

Social Security benefits continue to fall short year after year putting retirees at greater risk from inflation, while a disproportionate percentage of their income is spent on soaring medical costs. A record number of retirees are now turning to a reverse mortgage to supplement their income and stop pinching pennies.

In 2008, 48 million Americans age 65 and over who depend on Social Security received a Cost of Living Adjustment (COLA) increase of 2.3 percent or, on average, an extra $24 per month. According to the Congressional Budget Office, Social Security benefits are forecast to increase just 2.8 percent in 2009. Retail prices are up 4 percent last year with a 5.7 percent rise in food, 5.5 percent increase in home energy, and a 35 percent jump in gasoline.

Social Security is supposed to protect retirees, but according to a recent study by The Senior Citizens League, retirees have lost 40 percent of their buying power since the beginning of the decade. Each year since 2000, retirees have received an increase in their Social Security benefits lower than the rate of inflation. Social Security benefits have increased by just 22 percent, while retiree expenses have risen by 71 percent.

Not only are Social Security benefits rapidly falling behind inflation, a recent survey by the Kaiser Family Foundation found those age 65 and older spend five times more on health care than younger adults. Medical services have risen by 5.7 percent a year, hospital services by 8.5 percent, and home health-care and nursing-home fees by 4.5 percent.

Medicare Part B premiums have soared by more than 93 percent since 2001, leaving many retirees to cover the rising cost of doctor’s visits, tests, and outpatient hospital care. This squeeze on retirement income is putting many at risk of depleting their savings, delaying necessary home repairs or medical treatments, or cutting back on food and prescriptions.

To offset lost income and provide greater financial security, a record number of retirees are taking advantage of a government-insured reverse mortgage.

A reverse mortgage enables homeowners 62 and older to borrow against their home with no repayment for as long as they live in their home. Credit and income are not used in qualifying for the reverse mortgage, and closing costs are financed, so there is usually no money out of pocket. Plus, a reverse mortgage does not affect Social Security or Medicare Benefits.

Reverse mortgages provide the flexibility to customize the way funds are received to best meet individual needs. This includes a lump sum, a line of credit, monthly payments, or a combination of two or more of these options. This makes it possible to supplement monthly retirement income while using the line of credit for emergencies.

Many of the retirees who contact us have a mortgage and high credit card payments that are putting their home and future at risk. In many cases, we are able to pay off their existing mortgage and other debts with a reverse mortgage. By eliminating these monthly payments, our customers are free from the stress they have been living with each month and are able to afford those things they have been putting off.

Advocacy groups for the elderly are lobbying to change the index used to determine adjustments to Social Security benefits to the Consumer Price Index (CPI) for Elderly Consumers or CPI-E. Two bills introduced in the current Congress (H.R. 1953 and H.R. 2032), if passed, could mean tens of thousands more for retirement years.

Retirees Find Alternative to Going Back to Work... the Reverse Mortgage

After leaving the rat race to enjoy retirement, many retirees find that their financial demands are greater than expected. Going back to work may seem like the only solution, however, an increasing number of retirees are opting to take out a reverse mortgage.

According to a report by the Employee Benefit Research Institute, 37 percent of retirees report having to go back to work after retirement. This is up from 27 percent in 2006. Finances were identified as one of the primary reasons. When you factor in retirees unable to go back to work due to a health-related problem or caring for a spouse, the percentage is much higher.

For some retirees, going back to work is more a matter of wanting to stay active and productive. For others, it is a financial necessity. In either case, there are financial consequences to consider:

• It can decrease the benefit amount from Social Security for those who have begun
receiving Social Security and have not yet reached the “full retirement age” (65 to
67, depending on when you were born).

• There is no change in the benefit amount from Social Security for those who have
reached “full retirement age.”

It is a good idea to check with the Social Security Administration before deciding to go back to work. They provide an online benefit calculator and useful information on their website. You can also reach them at 800-772-1213.

Other important considerations include a possible increase in your tax obligation and work-related expenses. Social Security benefits received at any age become partially taxable once your income exceeds a certain level (the specific amount is adjusted annually). Also, you have the expense of commuting to and from work. With the rising cost in gas prices, this may make going back to work cost-prohibitive.

An alternative for many retirees faced with having to go back to work is to take out a reverse mortgage, which enables homeowners 62 and older to convert the equity in their home into a lump-sum payment, monthly income, a line of credit, or a combination. No repayment is required for as long as you occupy your home as your primary residence.

Funds from the reverse mortgage do not affect Social Security or Medicare benefits. Our senior customers have been able to continue to enjoy their retirement with the peace of mind of knowing they will not outlive their retirement income.

The money from the reverse mortgage is tax-free because it is not considered income.
As a retirement tool, the reverse mortgage is growing in popularity. The Department of Housing and Urban Development (HUD) reports that 9,112 reverse mortgages were endorsed in May 2008. This brings the year-to-date total to 73,875, a 3.3 percent increase over 2007. For retirees who are not able, or do not enjoy the prospect of having to go back to work, the reverse mortgage may just be the answer.

National Reverse Mortgage Education Center

Reverse Mortgage Calculator

HECM Saver

Reverse Mortgages can be a Life-Changing Event

Retirees at Greater Risk from Inflation: Reverse Mortgages May Help

Retirees Find Alternative to Going Back to Work... the Reverse Mortgage

More Reverse Mortgage Articles