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A1. GETTING MONEY FROM YOUR HOUSE*
A bonus for homeowners, reverse mortgages allow you to draw money from your home. This FHA guaranteed program enables older homeowners (62+) to "borrow back" a portion of the equity in their home and convert it into cash while remaining in your home for as long as you want. You remain on title and do NOT have to make any loan payments for as long as you continue to live in the home and it remains your primary residence. When the last borrower sells, moves out or passes away, the loan becomes due. This program enables many senior homeowners to age in place.
A reverse mortgage offers advantages over conventional loans because they address the fact that so many older people are retired and/or live on fixed incomes and often can't meet normal lending guidelines. The funds are tax-free and can be used for any purpose. Many seniors have chosen to secure in-home health care plans and/or life insurance policies, help family members now, meet increased living expenses without selling investments, make home repairs, and help with estate tax planning to avoid higher liabilities associated with inheritances.
Proceeds from a reverse mortgage do not affect Medicare or SSI benefits in any way. They can impact Medicaid benefits in certain situations, so it is a good idea to consult with an elder-law attorney. Reverse mortgage borrowers continue to own the home, and are responsible for paying property taxes, insurance, and home maintenance.
How Much Money Can You Get From a Reverse?
Loan Product Options
Both products feature an adjustable interest rate (ARM) or fixed rate option, and that rate is based on the LIBOR, or London Interbank Offered Rate, plus a margin charged by the lender. Keep in mind that a higher initial interest rate lowers the amount of money you will receive.
The Adjustable Rate (ARM) HECM allows you to access the money in one of three ways: you can take it all; receive it in the form of monthly payments; or you can leave it in a credit line account.
The credit line option gives you the most flexibility. You can withdraw the money in any amounts, whenever you wish. The money that remains in the credit line does not incur ANY interest. You are only charged interest on the money you withdraw from the credit line.
Reverse Mortgage Costs
The next step is to set up a phone call with an FHA-approved reverse mortgage counselor. The FHA requires that counseling be completed before an applicant can proceed. Counselors are trained and not affiliated with any lender. The phone calls usually take less than an hour and establish the applicant’s understanding of the loan. There is a $125 fee that must be paid by the borrower. Recently, the FHA funded the program, so that fee is waived. You will receive a certificate of counseling in the mail, and it will become part of the application.
The application process is fairly routine. The loan officer meets with the client to explain each document and secure the appropriate signatures. Within 72 hours of signing the application, the client will receive a Good Faith Estimate, which lists all the costs associated with the loan item by item. These figures are not allowed to increase except for a few very specific reasons.
The property must then be scheduled for appraisal, and in some areas for a pest inspection. The entire process can vary in terms of completion time, depending on the lender's turnaround time and unusual conditions that can arise, but it usually averages four to six weeks. The applicant can change his or her mind at any point in the process, including a 72-hour rescission period after the loan is closed.
A reputable reverse mortgage professional should consult with the borrower to determine his or her goals and priorities. The FHA now prohibits reverse mortgage originators from selling their clients other financial products such as annuities and insurance policies. They have increased oversight and the penalties for violations by loan originators. Borrowers must perform due diligence before using the proceeds for investment purchases and should consult with a certified financial advisor.
Because reverses are a negatively amortized loan (the principal balance grows) there is the concern that the balance due can eventually wipe out remaining equity. Generally, the home's appreciation rate doesn't lag so far behind the interest being paid as to immediately start decreasing that equity which is left. Usually, the retained equity actually increases for the first 10-15 years or so of the loan, and then starts rolling back down. Most often, there is money left to leave to heirs, but be sure to check the amortization table to get a better idea. Heirs have 30 days after the death of the owner to decide if they want to sell the property or refinance it. With extensions, they may have up to a year to complete the transaction.
If the appraisal cites certain problem areas on the property that require repair, the reverse mortgage can still go through before they are corrected. The lender will require a repair estimate and will put that money aside (plus 50%) to hold in escrow until the repairs are completed. A lender may require that some structural repairs be remedied before the loan can be closed, but this is extreme.
A borrower may own a second home in addition to the primary residence and reside there for part of the year, just so long as the borrower doesn't rent the home upon which the reverse was taken. You ARE permitted, however, to rent out rooms (up to 50%) If you are the sole borrower and suffer a medical emergency that requires staying in a care facility of some kind for more than a year, the lender can call the loan due.
*Provided courtesy of John Brodey, Sequoia Pacific M. C., Santa Rosa, CA.
Looking for other options? Click here:
A2. THOUGHTS, FEELINGS, AND YOUR HEALTH
Problem: People often acknowledge the need to change lifestyle habits to decrease the risk of heart disease or other physical ailments. Rarely, though, do we actually do anything to promote healthy emotional reactions. We often ignore stress management or coping skills, or do not take them seriously.
Heart disease, stroke, cancer, and accidents account for two-thirds of all deaths in the United States. Heart disease and stroke alone kill more people in this country than all other diseases combined.
A concerted effort has been made to educate the public about the risk factors or likelihood of contracting a given illness. This is particularly true in the case of heart disease. (Unfortunately, much of that education takes place during TV commercials for heart-disease drugs, and very expensive ones, at that. Not an ideal place to get our education.) We are now being asked to reduce their risk factors by controlling other diseases, such as high blood pressure and diabetes; by not smoking; eating foods low in saturated fats and cholesterol; losing weight; and managing our diabetes. Rarely, though are we asked to do anything to protect the heart's condition through proper emotional reactions. Stress management and coping skills are often ignored or not taken seriously.
Here's an interesting "for instance": Dr. James Muller found that more heart attacks in the U.S. occur between 8:00 and 9:00 a.m. on Mondays than at any other times. He said that this is significant not only because Monday morning is the beginning of the work week, but because it triggers a person's attitudes and feelings about his or her job. A 1973 study in Massachusetts shows job dissatisfaction to be the best predictor for having a heart attack.
A Solution: Drs. Cooper and Aggen experimented with a relaxation technique to effectively reduce cholesterol. It consists of sitting quietly for 15 minutes twice a day, allowing the mind to be passive and inactive. After several weeks, while weight and diet remained constant, and while exercising, cholesterol fell by about one-third.
Dr. Dean Ornish, one of our favorite cardiologists, reported that it is possible to reverse "permanent" heart damage, cholesterol scarring, and deposits in the coronary arteries with a mind-body oriented approach, consisting of participating in group therapy and engaging in group interaction, while modifying diet and exercising.
These doctors are not saying we should discard the tremendous advances in medicine. They are simply advocating a complementary approach to medicine, a mind-body approach.
Within the last 15 years there has been an accumulation of research and clinical studies which provide data to support the position that emotions and our way of viewing a stressful situation play a crucial role in preventing an illness, promoting and maintaining health, and helping in the treatment and rehabilitation of illness.
How Do You Know it’s Time to Talk to Someone About Your Problems:
However, seeking help may be difficult for some of us. We may be hesitant to talk about problems with a professional because we may be embarrassed to admit we cannot cope on our own. But talking with a professional may not only help ease the effects of our particular situation, but also teach us effective coping skills for the future.
So how do we know when to seek help? We all manifest stress in different ways. Warning signals are different for each person. Some persons under stress may withdraw from others; some of us may have crying spells, or headaches.
Treatment is indicated when symptoms such as poor concentration, irritability, loss of or increase in appetite, inability to sleep, increased use of drugs or alcohol, sadness, fatigue, or recurrent thoughts of death interfere with our daily activities.
Early treatment can prevent prolonged emotional suffering (which is just as real as physical suffering) and feelings of despair. Facing problems can help us learn about ourselves and help us make life more meaningful.
B. DID YOU KNOW...?
1. Is Hospice for You?
Find more Hospice - related books at http://www.seniorresource.com/SRBaz.htm#books
2. Retiree Activities Offices for Armed Services Personnel
C. THOUGHTS FOR THE MONTH
We present here some words from those with a birthday this month.
More "Thoughts" at: http://www.seniorresource.com/thought.htm
D. SPECIAL SURFING SITES
1. Life Expectancy (thanks to BK, Del Mar, CA)
2. Disability Resources
E. OH MY AGING FUNNY BONE
1. Focused Education for Seniors
2. Getting in Shape
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This issue has been edited by Betsy Day (firstname.lastname@example.org).
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Aging in Place