Reverse mortgages and an increase in home value

Reverse mortgage and an increase in home value and equity

The homeowner gets to keep it

Those familiar with reverse mortgages understand that it is the value of the senior citizen's home that serves as the basis for the amount of the reverse mortgage.  The mortgage has a face amount larger than the amount borrowed.

So, the borrower's question then arises, if my home increases in value, do I get to keep it?

The discussion follows on NJMoneyHelp.com:

Q. When there is a reverse mortgage, what happens if the value of the home goes up? Does the owner get the difference between the mortgage amount and the higher home value, or does the mortgage company get it?
— Homeowner

A. Let’s go over how reverse mortgages work.

A reverse mortgage is a loan that is available to homeowners who are 62 and older. The loan is a payment-free loan and interest accrues over the life of the loan, said Marnie Hards, a certified financial planner with Aznar Financial Advisors in Morris Plains.

She said the loan must be repaid in full upon the borrower’s death, when the home is sold or when the homeowner moves out of the home.

There are several ways you can tap the equity in the home.

“You can take a lump sum, a monthly payment or set up a line of credit that you may draw from,” Hards said. “The amount that will be available to you in the form of a reverse mortgage is based on a combination of the age of the youngest borrower, the property value and the interest rate available.”

When you establish a reverse mortgage, there is a principal limit, which is the maximum amount that you can receive from the mortgage, Hards said. This amount is determined at closing.

“If the value of your home increases and you want to increase the loan amount of the reverse mortgage, you would need to refinance your existing mortgage,” Hards said. “Homeowners may choose to refinance their mortgage if the lending limit increases, the interest rate decreases or if the current value of the home has increased since it was first set up.”

The current reverse mortgage limit amount in 2020 for the HUD home equity conversion mortgage (HECM) is $765,000, she said.

At the homeowner’s eventual demise, the beneficiaries would receive the market value of the home less the balance on the reverse mortgage at that time, Hards said.

There you have it!

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

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The Reverse Gear - Reverse Mortgages More Appealing & Affordable

GETTING credit is no simple task these days, even under the best of circumstances — just ask anyone who has applied for a mortgage. But it can be even more problematic for those who are retired, with many facing the triple whammy of declining income, falling home values and dwindling savings from Wall Street’s meltdown.

Looking for a way around the continuing credit crunch, more older people are exploring reverse mortgages, which allow homeowners 62 or older to borrow against their equity.

The Sunday, March 15, 2009, New York Times discusses the new interest in reverse mortgages as an alternative to conventional mortgage refinancing. A sidebar sums up the program:

• They can help older homeowners who are house-rich but cash-poor, allowing them to remain in their homes indefinitely, and even finance their retirement.
• Borrowers convert the equity in their homes into cash while retaining ownership. The reverse mortgage does not require monthly payments. It’s usually repaid when the house is sold or the borrowers move out.
• Borrowers must be at least 62 years old and own their home as their primary residence.
• The sole financing source right now is the Federal Housing Administration, an arm of HUD.
• Several factors determine how much can be taken out, including the age of the youngest borrower, current interest rates and property value.
• There are several options on getting your money. Borrowers can choose to be paid all at once, in a lump sum of cash; through a monthly cash advance; through a line of credit to be taken out at any time; or via a combination of these methods.
• Fees are steep, running from $7,000 to $20,000, which is why many financial advisers consider reverse mortgages a financing source of last resort.

To read the full story, go to The Reverse Gear.

Vested Title Inc.
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Call Them Irresponsible - Rewarding those who put the 'liar' in liar loans

The Wall Street Journal's editors weigh in on the president's mortgage foreclosure prevention program: Call Them Irresponsible - Rewarding those who put the 'liar' in liar loans.

President Obama continues to insist that only "responsible families" will benefit from his foreclosure prevention program. Addressing Congress last week, Mr. Obama said his plan "won't help speculators or that neighbor down the street who bought a house he could never hope to afford." Sorry, Mr. President. It's becoming increasingly obvious that your plan is going to help tens of thousands of borrowers who put the "liar" into liar loans.

Why won't it work as planned? "In Congressional testimony last week, [Federal Reserve Chair]Mr. Bernanke compared many troubled borrowers to people who accidentally start fires by smoking in bed." FDIC Chairman Sheila Bair "told public radio that it would be "simply impractical" to review old mortgage applications and try to distinguish between honest and dishonest borrowers. All of this moved the Associated Press to report that the President's "assurance Tuesday night that only the deserving will get help rang hollow."

Mortgage fraud is not at an end according to the Mortgage Asset Research Institute and the Treasury's Financial Crimes Enforcement Network.

There is a moral hazard in rewarding bad decisions. But it's worse than that: The White House plan contains penalties for everyone else. The mortgage "cramdown," allowing bankruptcy judges to reduce the amount owed, can only make investors less willing to lend to future homebuyers.

Even Fannie Mae has warned "investors that its focus on foreclosure prevention "is likely to contribute to a further deterioration" in results. Since the Obama plan shovels another $100 billion each to Fan and Fred[die Mac] -- for a total commitment so far of $400 billion -- Fannie is talking to you."

What do you think? We'd like to know.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Washington Report: Outlines of Stimulus Plan by Kenneth R. Harney

Realty Times contributor Kenneth R. Harney outlines the stimulus plan as it affects lenders and borrowers. The 3 key points

1. 3 to 4 million borrowers whose loans are owned by Fannie Mae or Freddie Mac will be eligible for rapid refinancings if equity is inadequate under normal guidelines. "Many of these owners will get new fixed, long-term rates in the low five percent range, improving their chances of staying out of default and foreclosure."


2. "An aggressive $75 billion outreach effort to keep millions of debt-laden, seriously delinquent owners out of foreclosure." Participating lenders and servicers will receive co-payments from the government that will reduce the monthly maximum housing expense from 38 % to 31 %.

3. Fannie Mae and Freddie Mac "will each receive $200 billion of additional injections of capital from the government, and the Treasury will continue to purchase their mortgage backed securities to keep interest rates low for all borrowers."


Says Harney,

It will be weeks and months before we begin to see just how effective the Obama housing relief effort is in stabilizing prices and preventing foreclosures.

Read the full report here.




Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com Sphere: Related Content

From the Wall Street Journal - Sheila Blair's Mortgage Miracle

Our settlement department was busy a few years ago closing what are now called sub-prime mortgage loans. They varied from "interest only" loans to those featuring locked-low payments with interested adjusting to LIBOR ever few months and the possibility of negative amortization up to 125% of the original principal balance of the loan. If you have a problem understanding that sentence, join the borrowers who lined up to cash in on the their so-called equity. These folks were in over their head the moment they walked away with the leftover cash from their refinance.

Now comes the FDIC with a plan "to prevent an estimated 1.5 million foreclosures by the end of 2009. She plans to accomplish this feat by modifying more than two million loans at what she estimates would be a taxpayer cost of $24 billion. This may be wonderful politics, but the real-world evidence suggests it will be far more difficult and expensive."

For more details on the plan and its likelihood of success read the Wall Street Journal article Sheila Blair's Mortgage Miracle

Stephen M. Flatow

Vested Title Inc., 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306. Tel 201-656-9220. Fax 201-656-4506. E-mail vti@vested.com Sphere: Related Content