REAL ESTATE
REVERSE MORTGAGES
CAN PROVIDE SOME SENIORS WITH FINANCIAL RELIEF
BY C . HILLAL EASTBURN , ATLANTIC HOME EQUITY
Reflecting back on choices I have made , goals I have set and obtained ( or not ), I am grateful for all the teachers I have had and for all the lessons learned . I live in a lovely home in a wonderful neighborhood in Frederick , and have a wonderful daughter and grandson . I am blessed and have much for which to be thankful , but the path to these blessings has taken many twists and turns .
I married young ( too young , according to my parents ), and managed to complete my education , eventually earning a Doctorate in Education from the University of Virginia . After retiring from 40 years in education in 2012 , I developed squamous cell carcinoma of the tongue and was successfully treated at John ’ s Hopkins a year later . One year after that , in 2014 , my husband and I divorced . All of my retirement plans were shattered ; I began to make plans to downsize into a small condo and reconstruct my life , grateful for my health and the love of my family and friends .
As I began exploring my options , I noticed ads for reverse mortgages . After some research , I communicated with seven agents from companies based in four different states . I gathered all the information I could find about reverse mortgages and consulted with as many people as I could find to learn more .
I obtained a copy of “ Use Your Home to Stay at Home ,” the official reverse mortgage consumer booklet approved by the U . S . Department of Housing and Urban Development ( HUD ) and published by the National Council on Aging ( NCOA ) in 2013 .
The availability of reverse mortgages commenced in 1988 when President Ronald Reagan signed the Federal Housing Authority ( FHA ) Reverse Mortgage Bill . The purpose of this bill was to provide a means for senior citizens , ages 62 or older , to remain in their own homes with lesser financial burden .
There are several types of reverse mortgages . A Home Equity Conversion Mortgage ( HECM ), offered by HUD and insured by the FHA , is the most popular . There are two types of HECM loans : A Standard HECM and a Saver HECM . The HECM Saver loan has lower upfront costs , but does not provide as much cash to the lender as the HECM Standard loan . A Proprietary Reverse Mortgage is designed for people with a very high value home .
These mortgages are called “ reverse ” because instead of the borrower having to pay money each month to the lender to eventually pay off the loan , the person taking the reverse mortgage receives money from a lender in one of several ways , depending on what best suits their needs .
Where does the money come from ? A reverse mortgage draws from the equity in your home . Whereas in a traditional mortgage , the equity in your home increases as you continue to make monthly mortgage payments , a reverse mortgage decreases the equity of your home . The good news is that with the restructuring of reverse mortgages that occurred after the financial collapse of the mortgage and real estate industries in 2007-08 , you can never owe more on your reverse mortgage than the value of your home , because reverse mortgages are insured by FHA / HUD . If you sell your home and there is still equity after your Reverse Mortgage is paid , you will receive that equity . If you pass away , the reverse mortgage must be paid and if there is equity remaining , your heirs will receive that equity . The money that you receive from a reverse mortgage is tax-free .
22 FREDERICK COUNTY GUIDE | SPRING 2016