So many things happen at the beginning of each new year.   Resolutions, reviews, re-organization.   Getting your finances in order is an important part of the process, too.

If you are 62 or older, your investment strategies are probably a bit more conservative – you can’t afford to take large risks, especially given the past volatile performance of the market. So although 2010 was a year with some return to growth,  you may still be wondering how you can get access to additional monies.

Would having the ability to pay off your $75k mortgage be important to you?  How about helping your son or daughter with just a little extra cash?  What about easy access to a nest egg when you need it?
All these things can be possible using a resource right under you roof – your home.  
Your home can be used to qualify for a Reverse Mortgage.  In October 2010, the government introduced a new type of Reverse Mortgage, called the “HECM Saver”.The Saver is a very viable“Plan B” to access the quiet equity in your home.  The loan has substantially lower closing costs with corresponding access to a little less equity.The prior type of Reverse Mortgage still exists and is now called the “HECM Standard”.

HECM stands for Home Equity Conversion Mortgage,  a federally insured  Reverse Mortgage -- a financial tool that allows borrowers ages 62 and older to access a portion of the equity in their home, without selling, giving up title or making monthly payments. 
In this era of “tight credit”, few lenders were offering equity lines  to borrowers who did not have large income streams.  And,  traditional equity lines required monthly repayments.  Access to equity can still be accomplished with a Reverse Mortgage – and no monthly payments are required.  

Here’s an example, using a fixed rate under the current HECM Saver program, a 75 year old borrower can borrow approximately $351k (prior to closing costs)as long as their home appraises at-or-above $625,500 (the “national lending limit”).  Loan proceeds can be used for any reason whatsoever.  But existing morgages must be paid off before additional funds can be released to the borrower.

This type of “Saver” loan no longer has the 2% upfront government-mandated Mortgage Insurance Premium (MIP) which was capped at $12,510.  Rather the MIP is set at .1% (one tenth of one percent) or $62.50, and that is often paid by the lender.  This represents a HUGE SAVINGS in closing costs for access to about 20% less equity than available under the Standard program.

What does this all mean?  There is now a Reverse Mortgage option for borrowers who may need access to some equity but who want much lower upfront costs.  This can be a great solution for someone who simply needs to pay off an existing mortgage or wants access to funds for small remodeling projects or just wants access to the nest egg sitting in their home.

Every borrower would benefit from a healthy analysis of their personal situation.   With the complexities in the details of the loans, there should be no immediate assumption that one type of loan is better than the other.  This analysis is best done by someone who understands the nuances in product offerings and differences in lender pricing. 

I specialize in turning “gobbledygook” into “AHA – now THAT makes sense!”  I focus on education first (these articles are a start) and explain the variety of choices and details.  If you would like a no-obligation consultation, please contact me at my office at (650) 591-4430.

Judy Schwartz
Reverse Mortgages Only