MyBLACKJACKET.COM - Our primary goal is to provide you with the information needed to make an informed decision about the financing of your home. We work specifically with Seniors, Business Professionals, Business Owners and Executives to find them the home loan that works for their home and optimizes their cash flow, retirement, tax and other financial strategies. We specialize in Reverse Mortgages, Loans in Reverse, Home Loan Equity, Helping Seniors with a Reverse Mortgage, Reverse Loan, Home Equity Conversion.

A New Kind of Loan: In Reverse

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

• all at once, in a single lump sum of cash;
• as a regular monthly cash advance;
• as a "creditline" account that lets you decide when and how much of your available cash is paid to you; or
• as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don't 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, have equity and be 62 years of age or older.

Other Home Loans

To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don't have to make monthly repayments. So you don't need a minimum amount of income to qualify for a reverse mortgage. You could have no income and still be able to get a reverse mortgage.

With most home loans, you could lose your home if you don't make your monthly payments. But with a reverse mortgage, there aren't any monthly repayments to make. So you can't lose your home by not making them. Most reverse mortgages require no payment for as long as you — or any eligible CO-owner(s) — live in the home. So they differ from other home loans in these important ways:

• you don't need income to qualify for a reverse mortgage;
• you don't have to make monthly payments on a reverse mortgage; and
• you don't need good credit.

"Forward" Mortgages

You can see how a reverse mortgage works by comparing it to a "forward" mortgage — the kind you use to buy a home. Both types of mortgages create debt against your home. And both affect how much equity or ownership value you have in your home. But they do so in opposite ways.

"Debt" is the amount of money you owe a lender. It includes cash advances made to you or for your benefit, plus interest. "Home equity" means the value of your home (what it would sell for) minus any debt against it. For example, if your home is worth $150,000 and you still owe $30,000 on your mortgage, your home equity is $120,000.

Falling Debt, Rising Equity

When you purchased your home, you probably made a small down payment and borrowed the rest of the money you needed to buy it. Then you paid back your traditional "forward" mortgage loan every month over many years. During that time:

• your debt decreased; and
• your home equity increased.

As you made each repayment, the amount you owed (your debt or "loan balance") grew smaller. But your ownership value (your "equity") grew larger. If you eventually made a final mortgage payment, you then owed nothing, and your home equity equaled the value of your home. In short, your forward mortgage was a "falling debt, rising equity" type of deal.

Rising Debt, Falling Equity

Reverse mortgages have a different purpose than forward mortgages do. With a forward mortgage, you use your income to repay debt, and this builds up equity in your home. But with a reverse mortgage, you are taking the equity out in cash. So with a reverse mortgage:

• your debt increases; and
• your home equity decreases.

It's just the opposite, or reverse, of a forward mortgage. With a reverse mortgage, the lender sends you cash, and you make no repayments. So the amount you owe (your debt) gets larger as you get more and more cash and more interest is added to your loan balance. As your debt grows, your equity shrinks, unless your home's value is growing at a high rate.

When a reverse mortgage becomes due and payable, you may owe a lot of money and your equity may be very small. If you have the loan for a long time, or if your home's value decreases, there may not be any equity left at the end of the loan, but the lender takes that risk, not you.

In short, a reverse mortgage is a "rising debt, falling equity" type of deal. But that is exactly what informed reverse mortgage borrowers want: to "spend down" their home equity while they live in their homes, without having to make monthly loan repayments. There's more about this important concept in an article called "A 'Rising Debt' Loan" in the Basics section of this site.

Reverse Mortgages: Get the Facts Before Cashing in on Your Home's Equity

Whether seeking money to finance a home improvement, pay off a current mortgage, supplement their retirement income, or pay for healthcare expenses, many older Americans are turning to reverse mortgages. They allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.

In a regular mortgage, you make monthly payments to the lender. But in a reverse mortgage, you receive money from the lender and generally don't have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.

To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.

Three Types of Reverse Mortgages

The three basic types of reverse mortgage are: single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD); and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.

Single-purpose reverse mortgages generally have very low costs. But they are not available everywhere, and they only can be used for one purpose specified by the government or nonprofit lender, for example, to pay for home repairs, improvements, or property taxes. In most cases, you can qualify for these loans only if your income is low or moderate.

HECMs and proprietary reverse mortgages tend to be more costly than other home loans. The up-front costs can be high, so they are generally most expensive if you stay in your home for just a short time. They are widely available, have no income or medical requirements, and can be used for any purpose.

Before applying for a HECM, you must meet with a counselor from an independent government-approved housing counseling agency. The counselor must explain the loan's costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area.

The amount of money you can borrow with a HECM or proprietary reverse mortgage depends on several factors, including your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.

The HECM gives you choices in how the loan is paid to you. You can select fixed monthly cash advances for a specific period or for as long as you live in your home. Or you can opt for a line of credit, which allows you to draw on the loan proceeds at any time in amounts that you choose.You also can get a combination of monthly payments plus a line of credit.

HECMs generally provide larger loan advances at a lower total cost compared with proprietary loans. But owners of higher-valued homes may get bigger loan advances from a proprietary reverse mortgage. That is, if you have a higher appraised value without a large mortgage, then you may likely qualify for greater funds. Location (for example, your neighborhood) is only one part of the determination of appraised value.

Loan Features

Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
As you consider a reverse mortgage, be aware that:

• Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
• The amount you owe on a reverse mortgage generally grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases over time as loan funds are advanced to you and interest accrues on the loan.
• Reverse mortgages may have fixed or variable rates. Most have variable rates that are tied to a financial index and will likely change according to market conditions.
• Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A nonrecourse clause, found in most reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid.
• Because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So, for example, if you don't pay property taxes or maintain homeowner's insurance, you risk the loan becoming due and payable.
• Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.

Getting a Good Deal

If you are considering a reverse mortgage, shop around to compare your options and the offered terms. Learn as much as you can about reverse mortgages before you talk to a counselor or lender. It will help you ask more informed questions, which could lead to a better deal.

• If you want to make a home repair or improvement or need help paying your property taxes, you may want to find out if you qualify for any low-cost single-purpose loans that may be available in your area. Area Agencies on Aging (AAAs) generally know about these programs. To find the nearest agency, visit www.eldercare.gov or call toll-free, 1-800-677-1116. Ask the AAA for information about available loan programs for home repairs or improvements, or property tax deferral or property tax postponement programs.
• If you are interested in a federally-insured HECM, know that all HECM lenders must follow HUD rules, and that many of the loan costs including the interest rate will be the same no matter which lender you select. Still, some costs including the origination fee, other closing costs, and servicing fees may vary among lenders.
• If you live in a higher-valued home, you may be able to borrow more from a proprietary reverse mortgage. But it generally will cost more. The best way to see key differences between a HECM and a proprietary loan is with a detailed side-by-side comparison of future costs and benefits. Many HECM counselors and lenders can provide you with this important information.
• No matter which type of reverse mortgage you are considering, be certain you understand all the conditions that could make the loan due and payable. Ask a counselor or lender to explain the Total Annual Loan Cost (TALC) rates, which show the projected annual average cost of a reverse mortgage, including all itemized costs.

Be a Savvy Consumer

Be cautious if anyone tries to sell you something, like an annuity, and suggests that a reverse mortgage would be an easy way to pay for it. If you don't fully understand what they're selling, or you're not sure you need what they're selling, be even more skeptical.

Keep in mind that your total cost would be the cost of what they're selling plus the cost of the reverse mortgage. If you think you need what they're selling, shop around before you buy.

No matter why you decide to take a reverse mortgage, you generally have at least three business days after signing the loan documents to cancel it for any reason without penalty. Remember that you must cancel in writing. The lender must return any money you have paid so far for the financing.