Volume 2, Number 6 June, 2004
Monthly Quote
“A man travels the world over in search of what he needs and returns home to find it.”
-George Moore (1852-1933), Irish poet, author and dramatist

Tip of the Month

If you are thinking of buying a new house, an important piece in your decision should be your and/or your family’s commute. A smart test would be to drive to and from your prospective new house and your job during rush hour. If you find the commute long or complex, think about how much you would like to do that every weekday (or even weekend) for years. Do the other things you like about the home or community outweigh the nasty drive? Are you tired or irritable from the drive to or from work now? If the commute from a new home is not bearable, consider looking for a home or neighborhood closer to the places you work and frequent, or near to a public transportation stop so you can eliminate the commute completely.
New Federal Regulation Boosts
Appeal of Reverse Mortgages

SYNOPSIS: A new federal regulation could cut upfront insurance premiums on reverse mortgages, thereby saving elderly homeowners thousands of dollars.

A recent article on reverse mortages from the Wall Street Journal’s Guide to Property, RealEstateJournal.com, reported that a new federal regulation by the US Department of Housing and Urban Development could lead to elderly homeowners saving thousands of dollars. The new regulation will trim the costs associated with the upfront premiums paid for reverse-mortgage financing.

A reverse mortgage is a loan made against your home that does not have to be paid back for as long as you live there. The cash can be received either all at once, as a regular monthly cash advance or as a credit-line account that lets you decide when and how much of your available cash is paid to you. Regardless of how the loan is paid out, you typically do not have to pay anything back until you die, sell your home or permanently move out of your home.

To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older. To learn more about reverse mortgages, you can visit the AARP website (http://www.aarp.org/revmort), which is complemented by the reverse mortgage website sponsored by the National Center for Home Equity Conversion Mortgage (http://www.reverse.org).

The upfront insurance premium that homeowners are forced to pay when they refinance federally insured reverse mortgages have been subject to costly double penalties. The new regulation eliminates this double penalty, thereby creating an important financial incentive for those over 62 to access the equity they have built up in their homes. By taking advantage of a reverse mortgage, seniors can help pay for long-term health care insurance, at-home services, caregiver expenses, day-care services and much more.

Here are some interesting facts anyone considering a reverse mortgage should know:

  • Total fees for a reverse mortgage can end up being approximately 9% of the home’s value!
  • Rather than getting a reverse mortgage, another way to realize some of the equity built up in your home, is to downsize to a smaller, less expensive property.
  • Right now, over 13 million households would be able to qualify for a reverse-mortgage loan averaging over $70,000 each.

With this in mind, and with the new regulation, elderly homeowners should consider the now more attractive advantages of a reverse mortgage.