New Federal Changes in Reverse Mortgage Rules to Help Even More Seniors Retain Homes and Find Cash in Retirement

Printer-friendly versionPDF version

-- Consumer money resource Bills.com helps debunk seven common myths surrounding reverse mortgages --

San Mateo, Calif. – October 12, 2010–

A new reversemortgage product from the Federal Housing Administration (FHA) along with avote from Congress to extend higher reverse mortgage limits were recentvictories for seniors considering a reverse mortgage or for those seniorhomeowners in need of additional cash in retirement.

Reverse mortgages

are a type of federally insured home loandesigned to help seniors leverage the equity in their homes for cash. Consumermoney resource Bills.com today helped

explain these new changes

and

address common misperceptions

about reverse mortgages.

A reversemortgage is a federally insured mortgage product created to help seniors usethe equity they have built up in their homes, while staying in their homes. Areverse mortgage allows individuals 62 years or older who own their homes toleverage the equity in it to secure up-front cash, ongoing monthly payouts, ora combination of the two from a lender. Proceeds are issued to the homeownerand interest accrues on the loan, but no payments are due until the borrowerdies or sells the home. This loan does not hinge upon a

credit score

or income thresholds, and the only stipulationsare that the owner remains in the home and properly maintains the property.

The FHArecently announced a new version of the standard Home Equity ConversionMortgage (HECM) product. Called the HECM Saver, the new product allowshomeowners to borrower a smaller amount from their home than would normally beavailable with a standard HECM. Homeowners benefit from lower upfront closingcosts. Borrowers can generally access 10 to 18 percent less with the HECM Saveroption, but under the same terms and conditions as a standard HECM.

In additionto the new product, Congress recently passed legislation extending the $625,500loan limit for reverse mortgages. This higher limit allows homeowners who needit to extract more money from a standard HECM.

“These newchanges make reverse mortgages accessible by an ever wider range of olderAmericans, serving the needs and addressing the criticisms of both larger andsmaller borrowers,” said Ethan Ewing, president of Bills.com. “Reversemortgages aren’t for everyone, but for the right homeowner they remain apowerful tool for accessing cash in their homes or for paying unforeseenretirement expenses.”

Despitemore and more Americans applying for reverse mortgages, many older homeownersstill remain confused as to the benefits and dangers of this product. To helpclear up misperceptions about the product, Bills.com debunks the seven mostcommon myths surrounding reverse mortgages.

Myth #1:

The bank owns your home in areverse mortgage

Truth:

The bank never owns your home in areverse mortgage. The homeowner retains title as long as they live in the house,just as with a traditional mortgage.

Myth #2:

Your home must be paid off toqualify for a reverse mortgage

Truth:

The more equity a homeowner has intheir home, the more money they can borrow. But it is not necessary to havepaid off your original mortgage to secure a reverse mortgage.

Myth #3:

Reverse mortgages are too expensive

Truth:

The cost of a reverse mortgage canseem inflated because of FHA insurance, but it is in line with the costs of atraditional mortgage with FHA insurance. This insurance provides peace of mindand protects the borrowers from ever owing more than the cost of their homewhen it is sold. Additionally, the new HECM Saver product allows homeownersconcerned about costs to borrow less with reduced upfront costs.

Myth #4:

Reverse mortgages are only fordesperate people or those in foreclosure

Truth:

Many savvy older Americans use areverse mortgage as a valuable financial planning tool. The income from areverse mortgage can augment social security and investment income, allowingseniors to better enjoy their retirement.

Myth #5:

Heirs will be left to pay off thebalance of a reverse mortgage

Truth:

A reverse mortgage is anon-recourse loan and FHA insured. This means that a homeowner or their heirscan never owe more than the value of their property at the time of its sale.However, heirs do have the option of repaying the loan and purchasing theproperty themselves.

Myth #6:

A homeowner with poor credit cannotget a reverse mortgage

Truth:

Credit and income are not evaluatedwhen applying for a reverse mortgage. The only requirements are that thehomeowner be 62-years-or-older, own their home as a primary residence, andproperly maintain it and pay taxes. Many homeowners actually use a reversemortgage to help with foreclosure or bankruptcy. 

Myth #7:

Reverse mortgage proceeds aretaxable and will lower Social Security income

Truth:

Proceeds from a reverse mortgageare not taxable because they are considered a loan, not income. Homeownersshould consult a tax professional with any questions about their uniquesituation.

For moreinformation about reverse mortgages, visit the Bills.com

Reverse Mortgage Resource Center

. To ask a Bills.com expert a direct question, please visit

Ask Bill

. Bills.com President Ethan Ewing also

addresses these new changes

and shares the

facts behind the seven myths

of reverse mortgages in the linked video segments.

About Bills.com

Bills.com is the leading resource for free andpersonalized money help. Founded by a group of financial experts dedicated tohelping consumers save time, money and stress, Bills.com is designed to giveconsumers confidence in making money decisions. The site offers usefulinformation, powerful tools, and real money experts to give consumers theinformation they need in the way that they want it.

News Source : New Federal Changes in Reverse Mortgage Rules to Help Even More Seniors Retain Homes and Find Cash in Retirement