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You Got Reverse Mortgage Questions? Of Course Ben's Got Answers...(Here You Go) Plus: They're The Greatest, Cash-Flow-Friendly Financial Play For Seniors Ever Invented
May 1, 2003
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Dear Ben: I enjoyed your recent column regarding reverse mortgages. You clearly stated that reverse mortgages are only available to senior citizens who are 62 or older. I'm disabled, 54 years of age and draw Social Security Disability Insurance benefits. Would I qualify for a reverse mortgage? I own a home that's currently valued at $312,000 and recently refinanced my $160,000 mortgage (7-year ARM at 5.0125%).
Ray F. in Dallas
Dear Ray: Whew! My April 17, 2003 column triggered a slew of follow-up questions that I pitched to my reverse mortgage expert, Clive Hambrook of www.austinreversemortgages.com for answers. According to Clive: "I've never seen an exception made to the age requirement, under any circumstances. As if that wasn't enough, Ray wouldn't be able to receive enough from the reverse mortgage to payoff the existing first, anyway."
Dear Ben: The special section on your website on reverse mortgages: states that all borrowers must be over the age of 62. But I just saw an ad that states only one owner must be 62 (or older). Which one is correct?
MKS via e-mail
Dear MKS: Once again, Clive comes to the rescue: "The information on your website is correct, Ben (as if there was any doubt!). All parties on title to the home must be 62. A (younger/under age 62) person could be "deeded off title" to make a reverse mortgage happen, but that's a serious move that must be carefully considered from an estate planning standpoint."
Dear Ben: I'm a 74-year-old self-employed woman who could use some relief from the monthly mortgage. Since I would still have to pay insurance and taxes, can that be done on a monthly basis or only annually? Do I have a choice when it comes to who I select for my Mandatory Mortgage Counseling? I refinanced my mortgage in 2002 and it included a Home Equity loan and a Home Improvement loan; will this affect my ability to apply for a reverse mortgage?
MMA. Via e-mail
Dear MMA: I'm sure glad I found one of the top reverse mortgage experts in the state to answer everyone's questions. Here's all of your answers, according to Clive:
"#1: There are no escrows allowed on reverse mortgages in Texas. Property taxes and homeowner's insurance are usually paid annually but MMA might be able to work out a payment schedule with both her local appraisal district and with her insurance company.
#2 (regarding Mandatory Credit Counseling): I usually select the counselor closest to the borrower's home for convenience, but as long as the counselor is FHA-certified to provide reverse mortgage counseling, this shouldn't be a problem.
#3: The fact that she has a home equity loan outstanding creates a large problem. Currently in Texas "only a home equity loan can payoff a home equity loan." Believe it or not, I cannot (currently) help someone with a reverse mortgage if they have a home equity loan outstanding against the property. But there's good news: The state legislature is considering a proposition for this November's general election that will fix this (current) legal shortcoming."
Dear Ben: You made no mention of interest on a reverse mortgage, so is this a no interest loan?
BCM, via e-mail
Dear BCM: Here's Clive's answer: "The reverse mortgage that provides the most dollars is the FHA Home Equity Conversion Mortgage (also know as a "HECM"). The interest rate adjusts monthly and is tied to the 1-year T-bill index. The index is currently at 1.25%, to which a margin of 1.5% is added, resulting in a current interest rate of 2.75%. There's a 10% maximum increase in rate over the life of the loan; if your initial rate was 2.75%, the maximum lifetime rate would be 12.75%, regardless of how high the T-bill index may go."
Dose of Dover For The Week: With interest rates still at amazingly-low levels, now's the time to quit throwing money away on rent every month. Everything you need to know about buying or financing a home (and lots of info on reverse mortgages) is posted-free for the taking-on my website: www.bendover.com/home.asp.
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