Reverse Mortgages

Following is an article courtesy of Tony Stevenson, Mortgage Banker with M & I Bank, talking about reverse mortgages and how they might work for you:

Getting Ahead by Going in Reverse – The age when homeowners are first able to apply for a reverse mortgage.

2008 – The year in which the first baby boomers will turn 62. A baby boomer is any member of the generation of people who were born between 1946-1964. These were the years of a rapid increase in the birthrate in the United States.

8,000 – The approximate number of baby boomers who will turn 62 each day starting in 2008.
78.2 million – The number of baby boomers living in 2005.
81% – The homeownership rate of individuals 55-64, the highest of any age category. The next highest, 79.9%, is the homeownership rate of individuals 65 and older.
$50,000 – The median account balance of a 401(k)-style plan for those aged 55-64 in 2004. This replaces only 9 percent of income, on average, for workers in this group.

With the baby boomer population inching toward retirement age, and people living longer than ever before, it is important for individuals in this age group to maintain their financial well-being. A reverse mortgage is one product that can help seniors stay financially fit, and allow them to stay in their homes.

A reverse mortgage has unique features that aren’t available on a typical mortgage loan. A reverse mortgage enables homeowners age 62 and above to convert part of the equity in their homes into tax-free proceeds without having to make monthly payments to the bank. In essence, the bank makes funds available to the homeowner based on three main factors: age of the borrower, value of the home, and the prevailing interest rate. The funds made available through a reverse mortgage can be used in a variety of ways: healthcare costs, vacations, paying off debts, making improvements to their homes, paying off an existing mortgage, and paying for daily expenses.

In July 2006, M&I began offering reverse mortgage products to customers. Mike Odden, reverse mortgage product manager, M&I Bank, Madison, Wis., says customers who apply for reverse mortgages are facing a variety of financial circumstances. “The reverse product fills needs at all levels of the financial spectrum. We have helped seniors avoid foreclosure and recover from near financial ruin,” Odden says. “We have helped seniors who struggle with the day-to-day expenses that have become a financial burden. Others have used the reverse mortgage product to buy a second home or take a long deserved vacation.” Whatever the use, the reverse mortgage can result in a better quality of life and financial peace of mind. With this product, homeowners will never give up the title to the home, will not have to sell the home, and will not have to take on any new monthly mortgage payments. Additionally, the funds made available will not affect Social Security, pension, or Medicare.* Most importantly, almost anyone can qualify for a reverse mortgage, as long as the homeowner is 62 years or older, and uses the home as the primary residence.

The reverse mortgage program has been around in various forms for a long time. “It’s a product that has been developed and refined over time to meet the needs of customers,” Odden says. “The product is completely different than it was 10 years ago. The reverse mortgage really has had a positive impact on a lot of people who need extra money for a variety of purposes.”
The first step is for a homeowner to meet with an M&I Reverse Mortgage Specialist. “We encourage seniors to invite their family members or financial advisors to attend all phases of the process,” Odden says. An M&I Reverse Mortgage Specialist will listen to the needs of the senior, review the various options available, and help the senior determine if the reverse mortgage is right for him or her.

“Our goal is to educate all those involved with various aspects of the reverse mortgage program so that an informed decision can be made on whether the product is a match for the needs of the senior,” Odden says.

The next step is to have our senior participate in a mandatory meeting with a Housing and Urban Development-approved housing counselor. The role of the counselor is to give the reverse mortgage prospect an independent assessment and act as a neutral third party. The counseling can be conducted in a face-to-face meeting, or over the phone. Once the counseling is complete, the customer is presented a certificate to verify the completion. A reverse mortgage application cannot be processed until the counseling is complete.

Once the counseling has been completed and the customer has decided to move forward, the reverse mortgage is typically funded within 30 days.

"The biggest benefits for seniors who have a reverse mortgage are the ability to enhance the quality of their life, and provide financial peace of mind,” Odden says. "The truest measure of what the product means to our customers can be summed up in the results of our surveys. We survey all of our closed loan customers and receive overwhelmingly positive responses."

For more information, contact Tony at (317) 770-8549 or (317) 432-8876