• HECM Fixed Rate Standard Goes Away April 1, 2013

    Posted on January 30th, 2013
    Craig Phillips No comments

    To learn how this change may impact you please contact Senior Equity Financial today at (800) 261-8507.

    If you are considering paying off your existing mortgage with a Standard Fixed Rate Reverse Mortgage there is a limited time to do so.  With record low rates we may not see an opportunity similar to what is available today.  We do not know when the Standard Fixed Rate Reverse Mortgage will be reinstated, but when it is, we will most likely be in a higher interest rate environment.

    For case numbers assigned on or after April 1, 2013, borrowers who choose a Fixed Interest Rate will be limited to the HECM Saver Reverse Mortgage, the Federal Housing Administration announced today.

    The HECM Saver Reverse Mortgage provides significantly less monies and if you have a higher mortgage balance to pay off you may not qualify to pay off the full amount.  Contact us today for a no obligation consultation and comparison of available programs.

    All Fixed Rate Reverse Mortgages that are assigned a FHA case number on or before March 31, 2013, may be processed as either a HECM Standard or a HECM Saver. Any HECM Standard Fixed Rate Reverse Mortgages must close on or before July 1, 2013.

    The HECM Standard will still be available after April 1, but consumers will be limited to an Adjustable Rate Reverse Mortgage.

    Please note in order for an FHA Case Number to be assigned the applicant(s) must complete the required HUD Reverse Mortgage Counseling Requirements

  • Lower Cost Reverse Mortgages Are Now Available

    Posted on December 10th, 2011
    Craig Phillips No comments

    Reverse mortgages use to only exist in one form: The HECM (Home Equity Conversion Mortgage) Standard. The HECM Standard is available in both adjustable and fixed rate options.  Recently, HUD introduced a lower cost alternative for homeowners called the HECM Saver.

    The HECM Saver is a reverse mortgage with significantly lower upfront costs.  Compared to the HECM Standard it also offers less monies to the homeowner so it is important to determine which option may be best for you.  For homeowners who do not need or want the money provided to them with the HECM Standard can opt for the lower cost HECM Saver.

    The FHA Mortgage Insurance Premium (MIP) is the difference between the two options.  The MIP is part of the closing costs which goes to FHA.  This protects the lender in the event the loan balance is greater than the home value when the loan becomes due and payable.  This is good because neither the borrower nor the estate will be personally responsible for the loan if it exceeds the fair market value of the house when it becomes due.

    With the HECM Standard the cost of the MIP is 2% of the home value.  If your home is worth $300,000 this will be $6,000.  The cost of the MIP with the HECM Saver is 0.01%.  This is only $30 in a $300,000 house.  This is a tremendous savings in closing costs.  To get a better understanding of all costs involved you can review them here reverse mortgage costs.

    Whether a HECM Saver makes sense for you will depend on how much money you need to borrow from your home.  If you have a large mortgage to pay off you may need to do the HECM Standard because it provides more money.  If you are interested in setting up a Line of Credit, but do not want to incur the higher costs of the HECM Standard, then the HECM Saver may be perfect for your needs.

    To compare your options today access our online reverse mortgage calculator, which will allow you to compare the options available base upon your age and home value.  You will be able to determine which option may best suit your needs.  Our calculator will also allow you to compare different lump sum, monthly payment, and line of credit options.

  • Reverse Mortgage Counseling Changes Implemented

    Posted on October 8th, 2010
    Craig Phillips No comments

    As of September 11, 2010 HUD has implemented a new protocol for the federally insured reverse mortgage HECM’s (Home Equity Conversion Mortgage).  This change is to help improve the effectiveness of the counseling for homeowners considering a reverse mortgage.  This is also causing a longer process in obtaining a reverse mortgage if you are not aware of these changes and properly prepared.  HUD’s goal has always been to assure homeowner’s understand their options and responsibilities with a reverse mortgage. 

    We are also seeing agencies charge for their counseling services again.  They have the ability to charge up to $125 for the HECM counseling.  Many of the agencies receive grants from HUD which allow them to offer this for free.  If the agency is lacking funds, along with the amount of time the new process involves, we may not see agencies offering this for free as often.  If you are not certain a reverse mortgage is right for you does it make sense to pay $125 to find out?  Our goal is to sit down with you and go over all your options and help you determine whether or not a reverse mortgage makes sense and which programs may be beneficial to you.  There is no obligation or charge to sit down with us in order to learn your options.  If you know this is the direction you want to go after sitting down the HUD counseling would be the next step.

    It is also important to sit down with a company/individual experienced in the industry.  We have noticed with all the changes occurring the counselors are not completely up to date on all the new programs and options available.  A lot of the counselors wear many hats in their position and reverse mortgage counseling is only one part of their job.  Many are new to reverse mortgage counseling as well.  There have been instances where counselors have advised homeowners to get the lowest closing costs possible.  This is a concern because there are options today with very low closing costs, but this option may not be in the best interest of the homeowner due to the potential interest that may accrue against the loan.  And a company may be charging someone a higher interest rate in turn for lower closing costs.  This could also cause the loan to be a lot more expensive over time due to the interest.  We always sit down with people and go over the total costs of a loan, which includes not only the closing costs, but the potential interest that accrues.  It is only through this review you can properly choose the best program for yourself.  Our goal is to find the best program with the least ‘total costs’ for you.

    To help you prepare for your counseling you will need the following items prior to your appointment:

     1.            Using Your Home to Stay At Home

    2.            Preparing for Your Counseling Session

    3.            Loan Comparison

    4.            Amortization Table

    5.            Total Annual Loan Cost (TALC)

    When considering a Reverse Mortgage in Massachusetts you will need to remember the requirements set by the Massachusetts Division of Banks.  You do not want to get reverse mortgage counseling by someone not approved by the MA Division of Banks.  Please call us for further details on this.

    We would be happy to email, fax, or mail these items to you in order for you to be properly prepared for your counseling.  As always never hesitate to give us a call or send us an email.  We will give you the same caring service whether you decide to move forward with a reverse mortgage or not.

  • Reverse Mortgages Continue to Change

    Posted on June 3rd, 2010
    Craig Phillips No comments

    We are witnessing many changes occurring in the reverse mortgage industry and anticipate additional changes are to come.   After 22 years of successfully helping folks over 62 access the equity in their home, we now have reverse mortgage programs offered with little to no closing costs?  Is this good?  Yes and no.  Reverse mortgages are starting to look a lot like a ‘forward’ mortgage.  You never want to get caught up in a loan with no closing costs unless you understand how the loan works.  Banks do not offer loans for free!  The costs will be there, but will be in the form of a higher interest rate.  When considering any mortgage you cannot only look at closing costs.  You also need to consider the interest accruing on the loan.  The true cost of your loan will be both the closing costs and interest you have to pay back.  If higher closing costs means you will pay less in interest over the life of the loan your total cost will be less.  Be careful though because a low closing cost loan can sound very appealing.

    What we are seeing today are fixed rate reverse mortgages with little to no closing costs.  This is a great option, but the program requires a lump sum distribution at day one.  If you are ok with this and understand interest will accrue on all the monies then this is a great option as rates are low today.  If you do not have a very large mortgage or loan on your home then this option could end up costing you more down the road because it will accrue interest on monies you have not ‘used’ yet.  It is important to remember interest only accrues on the monies you stick in your pocket.  One other consideration in determining the total costs is to consider the interest earned on the lump sum distribution.

    The adjustable rate program does provide a lot more flexibility in how you can borrow the monies available.  If you do not have to pull out much money in the beginning the adjustable rate program will allow you to establish a line of credit and only draw down monies as you need them.  The significance of this is you will only be charged interest on the monies you borrow as you borrow them.  When deciding between a fixed and adjustable rate you want to consider how much money you are going to borrow and how quickly.  If rates do rise, which we know they will, how high would they have to go in order for the interest accruing on the adjustable program to exceed what would be accruing on the lump sum fixed rate program.  This will help you know which program may be more beneficial to you.

    This is what we do when we sit down with people to help them understand the differences between the reverse mortgage programs.  The more you know the better decision you can a make.  A reverse mortgage continues to be a great planning tool for retirement, but you need to make sure you fully understand all the options and changes occurring to assure you are setting yourself up with the correct program.

  • Massachusetts Reverse Mortgage Improvements Benefitting Homeowners

    Posted on March 25th, 2010
    Karl Phillips No comments

    Reverse Mortgage News, 5 Improvements Benefitting Homeowners

    1. Increased lending limits, which allows higher home values access to more equity
    2. Fixed rate reverse mortgages are providing additional options to homeowners
    3. Reduced closing costs as HUD reorganizes how loan origination fees are calculated
    4. Reduced servicing fees, which enables the reverse mortgage to open up more equity
    5. Increased competition, more public awareness, and the easy access to information provided by the internet is allowing those interested in a reverse mortgage to find companies offering the best service at the best price.

    Since the inception of the Federally-Insured reverse mortgage programs (known as the Home Equity Conversion Mortgage or HECM & insured by HUD, the Housing & Urban Development) in the late 1980’s, we have not had a period of time where so many positive improvements have been made to reverse mortgages in such a short amount of time.  We have recently witnessed lending limits rise, low fixed rate reverse mortgage offerings, reduced origination fees, reduced servicing fees, and a combination of competition, public awareness, and the internet allow those interested in a reverse mortgage to find companies offering the best service at the best price.

    Reverse mortgage lending limits have incrementally increased over the years, but we saw our biggest increases within the last couple of years as the limit rose to a high of $625,500 & is slated to stay this high for the remainder of 2010.   In summary, it took the program approximately 19 years to reach $362,790 in higher cost of living areas whereas it has taken less than 2 years for the limit to rise as high as $625,500 & be applicable to all living areas.  A lending limit is simply a cap on the home value.  When calculating how much equity a reverse mortgage will make available, HUD will use the lesser of the home value or the lending limit.  To fully understand how the monies available are calculated, please read our discussion located at How Much You Qualify For.

    Again, the last couple years have been good times for reverse mortgages, as the fixed rate reverse mortgage has become a reality.  Historically, the Federally-Insured reverse mortgage programs available came with an adjustable rate.  The options under the adjustable rate would allow for either a monthly or annual adjustment.  The monthly adjustable reverse mortgage has been and still is more popular than the annual adjustable because the lender’s margin added to the rate is considerably lower.  In the early stages of this product there were limited options, but now we have a fixed rate of 5.5%.  A fixed rate reverse mortgage at 5.5% is unique as it will always maximize the amount of equity available under HUD’s current formula (please refer to link in previous paragraph for further explanation of HUD’s formula). 

    Another recent benefit to reverse mortgages comes in the form of a cost savings to the consumer.  HUD issued amendments to their program, which reduced the origination fees.  Historically, the origination fees were identical to the HUD insurance premium; however, today they are calculated as 2% of the first $200,000 and 1% of the amount exceeding $200,000 with a cap of $6,000.  Origination fees cover the cost of marketing, underwriting, personnel and overhead.  Recent developments have allowed the origination fees to offset the discount the loan may require when sold to an investor, which is good news for the borrower as they will receive a lower rate and more funds available. 

    After the reduction in the origination fees, along came a drop in the servicing fees from $35 a month down to $20-$25 a month depending upon product (for more discussion about servicing fees, please go to Reverse Mortgage Costs).  This reduction not only saves money for the borrower but adds to the amount of equity available, a win-win for the consumer.  The next positive step is on the horizon.  Servicing fees are dropping below $20 a month for the first time in history and will possibly be as low as zero for some reverse mortgage programs. 

    The fifth recent benefit to reverse mortgages relates to the impact of competition, public awareness, and the internet, all of which help educate the families looking into these programs.  A more knowledgeable consumer will find the right reverse mortgage for their situation at the best price from a specialized company.   Proposed Congressional and State legislation will further contribute to the public awareness about reverse mortgages.  The end result, reverse mortgage programs have made lots of positive progress in a short span of time.  The recent downturns in the economy have impacted reverse mortgages but have also provided an environment for them to develop and mature for the better.

  • Fixed or Adjustable Rate Massachusetts Reverse Mortgage?

    Posted on March 8th, 2010
    Craig Phillips No comments

    When you are considering a reverse mortgage, your interest rate will be a significant part of the decision. There are pros and cons for both a fixed and adjustable.  I will get into breaking down the differences to help you understand how the rates are determined, the options for borrowing your money, and prepayment differences.

    Interest rates, whether fixed or adjustable, will impact you in 2 ways.  First, it will determine how much the loan will cost you.  Second, it will be used in calculating how much you qualify for.  You can go to our page on reverse mortgage interest rates to get a more detailed breakdown of the rates involved.

    When considering the costs of a reverse mortgage it is important to evaluate the interest rates and how they will impact your situation.  Besides interest rates, you also need to consider servicing fees and closing costs.  All three of these factors need to be analyzed when considering the costs of a reverse mortgage.  Here In this blog, we are only going to discuss interest rates.

    The biggest difference with interest rates will be whether you choose a fixed rate or adjustable rate reverse mortgage.  Fixed rate reverse mortgages do require you to borrow 100% of the proceeds at closing.  If you are not paying off a large mortgage, or have an immediate need for the monies, this may not be the best option for you.  If someone is encouraging you to invest the monies, we strongly urge you to walk away.  This is not a good investment.  If there is additional money you are required to pull out you may want to consider a CD or Money Market to offset a small portion of the interest.  You should also contact a tax advisor as any interest earned could have tax implications.

    If you do not have to pull the majority of the monies out, then you are more likely better off with an adjustable rate reverse mortgage.  This would allow you to only take what you need when you need it.  Interest will only accrue on the monies you stick in your pocket.  The unused monies can be set aside in a Line of Credit or used as a Monthly Advance.  This will give you a lot more flexibility in how you use your monies available.

    The last thing I would like to cover is the ability to partial pre-pay a reverse mortgage.  You need to understand a fixed rate reverse mortgage is a closed-end mortgage and an adjustable rate reverse mortgage is an open-end mortgage.  If you make partial prepayments to a fixed rate reverse mortgage, you will not be able to access those monies in the future.  Yes, it will pay down your loan balance, but those monies will not be able to be accessed.

    An adjustable rate reverse mortgage is an open-end mortgage.  If you decide to make partial prepayment s, it will pay down your existing loan balance and will also make those monies available to you in your Line of Credit.  This is a great feature in the event you are required to draw down your minimum distributions in tax deferred investments.  It allows you to pay down your loan balance, while not losing access to those monies in the future.  We encourage you to work with your financial planner when considering this option.  We work with many planners implementing such strategies, which help to maximize your liquidity and make your monies last as long as possible.

    Interest rates are only one consideration when deciding which options are best, and we will get into further discussions of other costs to consider when choosing a reverse mortgage in future blog posts.  Thank you for reading our discussion on fixed or adjustable rate with a Massachusetts reverse mortgage.

  • Is the Credit Crunch Effecting Reverse Mortgages?

    Posted on February 10th, 2010
    Craig Phillips No comments

    Everyone I talk to asks me how the credit crunch is affecting reverse mortgage. This is a great question as there are many different aspects of the credit crunch which are helping reverse mortgages and other aspects which are having a negative impact.  Home value is one factor impacting reverse mortgages.  Due to the increased amount of foreclosures and distressed sales, the Fair Market Value of homes has significantly declined over the last 12 months.  We have witnessed home appraisals ranging from 5% to 30% below tax assessed value.  Since many towns base their tax assessment valuations on sales from the prior year many will not be representative of current market value.  It is important to know this if you are considering selling or refinancing your home.

    Another significant impact to the reverse mortgage industry is the disappearance of the Proprietary Reverse Mortgage.  Historically, 90% of reverse mortgages have been the FHA HECM (Federal Housing Authority Home Equity Conversion Mortgage) reverse mortgage.  Today, almost 100% of reverse mortgages are the FHA HECMs as it is the only option available in most states.  The FHA HECM has been and is more popular for many reasons but primarily due to being federally insured.  The federal guarantees provide safeguards to both the borrower and the lender.  The importance of this is if the home can no longer repay the monies borrowed, the homeowner nor the estate, will be personally responsible.  FHA assures the bank is made whole and no other assets can be utilized for repayment of the loan.  This is why lenders are willing to lend money through the FHA at the low interest rates we are witnessing today.  With a Proprietary Reverse Mortgage the lender still cannot take recourse against the estate, but the lender will have to take a loss itself if the home can no longer repay the loan.  This is a risk lenders are not willing to take in today’s market.  This is why interest rates on the Proprietary Reverse Mortgages are usually higher as the bank has to take on the risk themselves.  The Proprietary market will return, but it will depend on how long it takes the credit markets to stabilize.