Reverse Mortgages in West Michigan

A few words on reverse mortgage interest rates

The most widely known and used type of reverse mortgage is the HECM, the Home Equity Conversion Mortgage, guaranteed by FHA/HUD.

Under that program, the amount of the loan is determined by the homeowners age, the current interest rate, other loan fees, and the appraised value of the property (up to FHA loan limits which in Western Michigan at this time are $200,160.)

Interest rates on HECM's have traditionally been linked to the 1 year Constant Maturity Treasury Rate (CMT.) As I type, this is 2%, plus a margin of 1.50%, which equals the fully indexed rate of 3.5%

Over the life of the loan, interest rate resets are capped  at 10 points.

Annual adjustable rate reverse mortgages are also available

Recently some HUD lenders have introduced new versions of the loan that are tied to the London Interbank Offered Rate (LIBOR), a common adjustable mortgage benchmark that tends to have fewer wide swings than the CMT. But - again as I type - the LIBOR currently has a higher rate, and thus does not provide as much money.

Fixed rate reverse mortgages are also available with rates approximating 6%.  However there is a big catch with this product: you're required to take the proceeds as a one time up-front payment.

Unless you need the full loan amount immediately, this probably isn't your best option.

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It just makes sense to seek informed  guidance when thinking about a reverse mortgage.  I've been doing reverse mortgages - and only reverse mortgages - here in Western Michigan since  2003.  Reach me TOLL FREE at (877) 308-1489.
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Do I receive a tax duduction on my reverse mortgage interest?

The June 24th issue of the Everett WA Herald has a clearcut explanation of both taxation of reverse mortgages and when interest paid on them can be deducted.

Here are a couple of key concepts from the article.

When you take out a reverse mortgage you receive a sum of money from the bank.

Since the bank requires no payments until the last borrower no longer inhabits the house, the debt grows larger each year.

The unpaid interest is added to the loan balance each month.

Eventually the loan is paid off when the home is sold - usually after owner's death.

Loan proceeds are not taxable income because  the money must be paid back.  (If you choose to sell your home after taking out a reverse mortgage,  you must repay the outstanding balance, and of course  you  keep any proceeds that remain.)

As long as  your profit on  the  sale was $250,000 or less - $500,000 for a married couple - all sale profits would be tax free.

Here's another difference in tax consequences: because no interest is actually paid on the mortgage until the home is sold, the interest deduction can not be claimed until that time.

Suppose for example that you decided to sell your house after accumulating $40,00 worth of unpaid interest. In that case, you could claim the $40,000 mortgage interest tax deduction for the tax year in which the home was sold.

I thought this newspaper article provided a pretty clear explanation of these points, but remember - anytime you are talking tax implications it's always a good idea to consult with an experienced tax advisor.

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Seniors, money from your home with NEVER a mortgage payment!
Please call with questions. MICHIGAN TOLL FREE: (877) 308-1489.
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What? No Inheritance?

Ron Lieber has an interesting article on why some of our kids will be looking at a "disappearing" inheritance here.

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Reverse mortgages require no monthly payment as long as you live in your home. Please call for details.  (616)  308-1489
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Reverse Mortgages and tumbling real estate values

I ran across an interesting thought in Conde-Nash's  e-magazine "Portfolio" the other day.

The article pointed out that as houses continued to linger on the market for more than a year, many homeowners aren't willing to wait to sell until prices bounce back and are looking at reverse mortgages as an interim solution, allowing them time to hold onto their homes until home values adjust.

I suppose the trade off is the costs associated with the reverse mortgage and the amount of increased value homeowners might regain as the market strengthens in  the future.

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Reverse mortgages: Seniors, money from home with never a mortgage payment.  Call toll free for a free analysis. 877-308-1489.
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Some thoughts on "Jumbo" reverse mortgages

Hands down, the most familiar reverse mortgage is the FHA/HUD "Home Equity Conversion Mortgage".  It accounts for the majority of reverse mortgages sold here in West Michigan.

But what if your home has a higher value than the HECM loan limits?

Well, then you're a candidate for a so called "jumbo" or "proprietary" reverse mortgage - a product designed for just such higher valued properties.

Offered by many reverse mortgage lenders, they are designed for a range of situations apart from those that the HECM addresses.

For example, besides higher valued homes, some proprietary products can be used on second (vacation) homes, and on purchase transactions.

Seniors interested in these products might be looking at them as a method of retiring existing debt, assisting in estate taxation issues,  or utilizing them for investment strategies.

Here's the difficulty faced in the current market situation: proprietary products face liquidity challenges. They exist based on the offering banks ability to sell them on the secondary market.

The current credit crunch has tightened market liquidity and has  curtailed the ability to resell these loans.

And by definition these types of loans are sought by owners of high valued homes. Unfortunately, in some instances, values  have  declined in today's market place.

This poses a real challenge if you own this type of home and are thinking of a reverse mortgage. 

You're best served by working with a specialist with broad knowledge of today's markets.

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First Financial Reverse Mortgages sells ONLY reverse mortgages; we sell no other product.  We are West Michigan's reverse mortgage  specialist.
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