Archive for the ‘Reverse Mortgages’ Category

Banks Bailing on Reverse Mortgage Market. We’re Not.

Tuesday, July 5th, 2011

Let’s say you’ve spent years and years building up equity in your home, and steadily seen its value rise. But suddenly, in the wake of the recession, you’re facing a cash-strapped retirement. Normally, a reverse mortgage would be a great way to turn that equity into a stress-free future.

The big banks can no longer help you do that. We can.

According to Aol’s DailyFinance:

Last week, Wells Fargo, the biggest name in the nation’s reverse mortgage market, announced that it was getting out of the business, citing concerns that housing prices could continue to erode further. That move followed in the footsteps of No. 2 reverse mortgage player Bank of America, which exited the business earlier this year. Combined, the two banking behemoths represented 43.6% of the reverse mortgage market, based on a 12-month trailing period ending in April, according to industry researcher Reverse Market Insight.

If you didn’t catch that, the two largest banks in the reverse mortgage market (43.6 percent of the market, in fact) just aren’t in the mood to ride out the unstable market any longer. To that we say: “Surfs up!” We’ll stick with you on this bumpy wave until we’re all on calmer seas again. Here’s how one of our Texas reverse mortgages can help:

For elderly homeowners over the age of 62, reverse mortgages are a great way to access the equity they’ve spent decades building up in their homes. Basically, we “buy” the home from the homeowner while letting them live in it as long as they’d like. They only pay insurance, property taxes, and general upkeep (some upfront fees also apply). This gives the homeowner a hefty sum of cash and the chance to enjoy their golden years without financial stress.

After the homeowner either passes away or simply moves out, we sell the house in order to make up the difference. If the market has recovered and the home sells for more than it was worth when the reverse mortgage was purchased, remaining funds will go to homeowner’s heirs.

In other words, it’s an innovative way to make what’s probably your biggest asset — your home — carry you through retirement. Contact one of our Dallas reverse mortgage specialists for more information.

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Three Questions to Ask Before Getting a Reverse Mortgage

Monday, January 10th, 2011

Reverse mortgages let you convert home equity into cash and increase your monthly income — without having to move out of your home or tend to a monthly mortgage payment.

Basically, the financial tool allows homeowners to transform their home equity into an annuity, which features guaranteed monthly or lump-sum tax-free payments, plus the chance to basically live in their beloved house rent-free. In exchange, the lender agrees to wait until after the homeowner’s death to sell the house and earn back the principal and interest (unless the homeowner decides it makes sense to pay it off themselves after, say, a market recovery). All together, this can “recession-proof” a homeowner’s retirement.

But like any financial decision, it’s important to take on a reverse mortgage carefully and with full understanding of what you might be liable for in the future.

Here are just three questions you should ask while in the reverse mortgage planning stage:

1. Do you understand the costs involved?

Because lenders take on considerable risk through reverse mortgages, there has traditionally been somewhat steep initial closing costs. This has changed, recently, thanks to new rules passed down by the Federal Housing Administration, which limit origination fees and make reverse mortgages much more accessible from the outset. According to the New York Times:

In October, the Federal Housing Administration, the unit of the Department of Housing and Urban Development that runs the reverse mortgage program known as Home Equity Conversion Mortgage, or HECM, introduced the Home Equity Conversion Mortgage Saver, or HECM Saver.

HECM (pronounced HECK-um) Saver trims the upfront insurance premium due at closing to 0.01 percent of a property’s value, from 2 percent. But the amount that can be borrowed is also reduced, by 10 to 18 percent, compared with the standard HECM loan program.

[...] Reverse mortgages boomed in recent years but then acquired a bad reputation, in part because of their costs. Origination fees for the loans are now capped at $6,000, while other closing costs are about equal to those for a conventional mortgage. Until HECM Saver, the upfront insurance premium was a major additional cost that could run as high as $12,510.

Still, it’s not free money, and you’ll want to make sure you know exactly what you’ll have to pay both initially and over the long run.

2. Are you aware of current home value?

Sadly, the equity that many homeowners in Dallas spent years and years building up is now significantly smaller, thanks to the housing market collapse. That $500,000 retirement plan might now be worth considerably less.

So when planning for a reverse mortgage, make sure you understand what your house is worth now—not in 2007 at the height of the bubble. Because once that equity is gone, it’s gone, and you probably won’t be able to take out another loan on the house to pay for unforeseen emergencies like health problems, or changes in financial viability. Make sure the reverse mortgage will be enough to last you as long as you’ll need it.

3.  Have you explored all the options?

At TexasLending.com, our home equity loans and home equity lines of credit can tap into that same source of equity, but with different set of costs and expectations that might be better suited to your financial outlook.

For example, if you can easily afford the monthly payments that come with a home equity loan, that loan would end up costing you less in the long run than a reverse mortgage, and the house would be fully yours again after you pay it off (leaving you the option of, say, taking out a reverse mortgage when you’re deeper into retirement).

Still, despite the risks, tools like reverse mortgages can provide homeowners with a welcome injection of cash and stability in a time without much of either. Do it cautiously, but we encourage you to explore the option.

At TexasLending.com, our Texas reverse mortgage experts know the loans inside and out, including the fine print of the new FHA rules. We’ll help you fully understand your options, and help you come up with a customized home equity plan that fits your current and future situations.

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Survey: Seniors Love Reverse Mortgages

Tuesday, December 28th, 2010

Apparently, getting to spend your retirement in your own home monthly-payment free is quite an attractive idea.

At least, that is, according to recent study commissioned by the National Reverse Mortgage Lenders Association. The survey of 1,800 seniors (and their adult children) showed that reverse mortgages have reached a remarkable 75-percent satisfaction rate.

According to Senior Housing News:

Nearly eight percent of those surveyed preferred to remain in their own homes and seventy four percent of reverse mortgage borrowers in the survey described their use of a reverse mortgage as a positive experience.  Seniors in the survey expressed that they understood the financial terms of the product very well (75%) and ninety percent felt no sales pressure as part of the reverse mortgage process.
“Without increased social security benefits, retirement funding will need to come from seniors’ own personal resources,” said Peter Bell, president of the National Reverse Mortgage Lenders Association (NRMLA). “In light of reduced stock and bond portfolios, seniors will have to consider other asset pools, including the use of home equity, to help fill this financial shortfall.”

The survey was conducted in the middle of one of the most reverse mortgage-friendly economic environments since the tool was introduced. Family financial woes and uncertainty has made the extra available cash a welcome—and, sadly, often necessary—option for those facing a tenuous retirement, and recent changes in mortgage law have made opening costs for reverse mortgages much, much cheaper.

In other words, reverse mortgages allow seniors many of the benefits of selling a home, but without actually having to sell it. Most retirees get to stay in their homes until the end of their days, but without monthly mortgage payments and with a healthy lump of cash for bills, expenses, and future financial security.

Still, that leaves nearly one in four seniors at least somewhat unhappy with their reverse mortgages—a stat that could reflect several factors, including: lack of understanding about some of the costs involved, unrealistic expectations about the sort of financial security a reverse mortgage can provide, and lenders who don’t look out for their customers best interests.

At Texas Lending, we’ll work tirelessly to make sure you understand what you’ll be getting into with a reverse mortgage, and provide the service and follow-up support to make sure you’ll stay happy with it. Contact us—our Dallas reverse mortgages experts are here to help.

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New Reverse Mortgage Rules

Monday, December 20th, 2010

Reverse mortgages have become especially popular in recent years, and for good reason.

Basically, a reverse mortgage lets homeowners live on financial support from the equity they’ve built up in a home. The financial tool allows homeowners to transform their home equity into an annuity, with guaranteed tax-free payments (either monthly or in a lump sum) for an extensive fixed term, while still essentially living in the house rent-free. In exchange, the bank or lender simply waits until after the homeowner’s death to sell the house and recoup principal and interest (unless the homeowner decides it makes sense to pay it off themselves after, say, a market recovery).

In tough economic times where cash is tight, these mortgages can have a “recession-proofing” effect on a homeowner’s retirement.

And now, thanks to a new program launched recently by the Federal Housing Administration, reverse mortgages may have just gotten a bit cheaper.

According to the New York Times:

In October, the Federal Housing Administration, the unit of the Department of Housing and Urban Development that runs the reverse mortgage program known as Home Equity Conversion Mortgage, or HECM, introduced the Home Equity Conversion Mortgage Saver, or HECM Saver.

HECM (pronounced HECK-um) Saver trims the upfront insurance premium due at closing to 0.01 percent of a property’s value, from 2 percent. But the amount that can be borrowed is also reduced, by 10 to 18 percent, compared with the standard HECM loan program.

[...] Reverse mortgages boomed in recent years but then acquired a bad reputation, in part because of their costs. Origination fees for the loans are now capped at $6,000, while other closing costs are about equal to those for a conventional mortgage. Until HECM Saver, the upfront insurance premium was a major additional cost that could run as high as $12,510.

In other words, the new federal rules reduce some of the (formerly painful) initial sting homeowners feel by mandating lower initial premiums and fees. Closing costs are now more or less the same as those for a regular mortgage. The mortgages are easy to qualify for with no minimum credit scores or income limits, but the homeowners can’t be underwater on the homes.

If you think a reverse mortgage might provide a helpful lifeline to your current financial situation, contact our Dallas mortgage experts to get the process started.

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Dallas Housing Market Collapse – Who’s Effected Most

Monday, October 4th, 2010

Some interesting foreclosure findings were released this week about who, exactly, is bearing the biggest brunt of the Dallas-Ft. Worth housing market collapse.

Of course, on one level, we’re all sharing the pain. According to the Dallas Business Journal :

Both affluent and entry-level homebuyers are bearing the brunt of the recession’s aftermath, according to new foreclosure data compiled by Addison-based Foreclosure Listing Service Inc.

A new report from the firm says 80 percent of the homes posted for foreclosure in a 19-county area in North Texas were priced at $200,000 or below.

The broader impacts make sense—foreclosures from any housing demographic have contributed to the larger housing crisis, which of course has then led to more home foreclosures. In other words, many homeowners who were in homes they could afford and were generally able to keep up on their mortgage payments lost jobs, investments, or pension wages due to the market collapse… and then suddenly found themselves no longer in position to keep up with their payments.

But if we take a closer look at the numbers, we can learn just a little bit more about what types of homes most fueled the crisis.

Again, according to the Dallas Business Journal :

George Roddy, Sr., president of Foreclosure Listing Service, said, “The largest gains in residential foreclosure posting activity were found at opposite ends of the Texas housing market among entry-level homes and ultra-luxury homes.”

Roddy said the largest gain in foreclosure postings over last year was in ultra-luxury homes, where the firm noticed a 27 percent jump in foreclosure posting activity.

[...] “Over the last year, the second highest increase in postings by home value within the study area was found among entry-level or starter homes valued at under $100,000 with a 16 percent gain in foreclosure notices,” Roddy said.

In other words, foreclosures have hit those who either bought too much house, or who probably shouldn’t have bought a house in the first place the worst. Either way, it was easy credit, risky loans, and market pressures to put as many people homes as possible that fueled the crisis.

At Texas Lending, we want to see you make your housing dreams come true. But we don’t want to see that dream become a nightmare, and see you in a situation where a leap of faith and a lot of housing hope ruins your financial future. So our Dallas home mortgage experts will work tirelessly with to get you in the right house—one you love, and one you will still love (and afford) ten or twenty years down the road.

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3 Ways Reverse Mortgages Recession-Proof Your Retirement

Friday, September 18th, 2009

Looking for a lifeboat in this recession? Consider this:

A reverse mortgage basically transforms your home equity into an annuity. In other words, you’d be guaranteed regular income payments for a lengthy fixed term, and get to live in your home rent-free. After death, the lender sells your house (presumably in a stronger housing market) to recoup both principal and interest, or you can sell it yourself when the markets recover.

Amazing, right? Too good to be true? It’s not, because it benefits homeowners, banks and our economic system as a whole.

Here are three ways reverse mortgages can specifically ease your recession woes:

1. Easing Credit = Capital

Credit froze when the markets crashed last September, which was essentially like sucking the gas out of a race car flying around the track at 300 m.p.h. And it effected everyone from the top to the bottom of the system. For regular seniors, this meant steeper credit rates, declining retirement portfolios, and more and more difficulty to get financing.

In response, reverse mortgages have introduced much-needed capital back into the system. The mortgages are federally insured, adding a much-needed dose of stability to a fragile system, and they act as an excellent substitute to conventional refinances.

For seniors, this means a level of capital and credit that can provide emergency finances, ease burdens on children and build a more secure future.

2. No Monthly Payments = Time

More than anything else, reverse mortgages provide seniors with cash, flexibility and time.

In all likelihood, the recession will ease over time and the housing market will eventually recover. But many seniors living on declining portfolios simply cannot afford monthly mortgage payments until then.

Reverse mortgages provide homeowners the access to the leverage of their housing investment and allow for a payment-free retirement . Seniors can live without the recurring squeeze on their finances and monthly fear of losing their home, and save that added income to secure their golden years in other ways.

3. Bigger Returns = Worry-Free Future

According to some experts, a reverse mortgage can lead to even better returns than a C.D., a money market fund or returns from selling a house outright.

“If you’ve been in the house for 20 or 30 years, all you’ve seen is your rate of appreciation slowing,” says Alan Glickstein, a senior retirement consultant for consulting firm Watson Wyatt Worldwide, told the New York Times . “You’re still sitting on what may be the biggest piece of your retirement wealth.”

Reverse mortgages are not right for everyone. But contact us, and our Dallas-Ft. Worth Metroplex-area mortgage experts will help you decide if a reverse mortgage could help you stay afloat during these tough economic times.

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