A reverse mortgage is a special loan for homeowners age 62 and over with no mortgage payments to make until the home is sold or the last borrower moves out. It can be described as a mortgage loan that permits but does not require monthly mortgage payments. (You can pay back any amount at any time without penalty.) Not having to make payments (1) can greatly improve cash flow and provide the cash needed for home, medical or retirement expenses, to accomplish financial and estate planning objectives and even to buy a home and (2) means no income test to qualify. The Home Equity Conversion Mortgage or "HECM" is a reverse mortgage that is insured by the Federal Housing Administration (FHA). A reverse mortgage when compared with other available options frequently offers the greatest likelihood of financial independence for the longest time. For example, for many homeowners the annual carrying cost of staying in their home (real estate taxes and homeowner insurance) is less than the annual cost of renting even a small apartment. For both personal and for financial reasons, staying in your home with a reverse mortgage can be the "Smart Choice" for financial independence.
What Is the Money Used For?
The Bethlehem borrower in the PBS Report (above) said she was “feeling the pinch” of living on a fixed income. By far and away, most borrowers use a reverse mortgage as an additional source of retirement income. A reverse mortgage can replace a conventional mortgage or home equity loan and eliminate mortgage payments. Whether used as additional income or to eliminate mortgage payments, a reverse mortgage always improves cash flow.
Some take an initial advance to buy a car or to pay some bills. Others take an advance each year to pay real estate taxes and/or home owner insurance.
The National Council on Aging “Use Your Home to Stay at Home” program suggests using reverse mortgage proceeds for home modifications, ramps and other necessary expenses so you can stay in your home longer.
Financial advisors are finding reverse mortgages useful as part of a strategy to accomplish a financial objective and/or to save taxes.
Finally, new in 2009 is use of a HECM reverse mortgage for home purchase. Homeowners age 62 and over, including those with limited income, can now use a reverse mortgage to finance the purchase of a new home. For example, a couple living in a $300,000 home with a $100,000 mortgage can sell their home and use the proceeds as a down payment on a new home. A $150,000 down payment matched with a $150,000 reverse mortgage could result in a likely more accessible $300,000 new home and no more mortgage payments.
Are a Lot of People Doing This?
The number of FHA insured HECM Reverse Mortgages has increased dramatically in recent years, from about 14,000 in 2002 to over 114,000 loans made in the Federal fiscal year that ended on September 30, 2009.
Why AFC Reverse Mortgage?
At AFC Reverse Mortgage, helping Pennsylvania senior homeowners pay for home, health and retirement expenses through an FHA insured Home Equity Conversion Mortgage (HECM) is our only business, and our staff has processed and closed hundreds of FHA HECM loans since 2004. You can call us any time day or night and almost always speak immediately to one of our experienced staff members, not a recording. You will work with our staff from initial meeting right through closing (not with an out of state processing center), and we will attend the closing. We work with a variety of HECM servicers and will do our best to help you find the program that is right for you. We are willing to come to you and will work with you and your advisors to help determine if a reverse mortgage is right for you. If you so choose, you never have to leave your home, and since we control the process, most of our loans close in as little as three to four weeks. John Krajsa, Jr., President, is an attorney with over 25 years of mortgage experience, is on the Advisory Board of the Pennsylvania Care Planning Council, is a member of the Pennsylvania Bar, the Virginia Bar , the Lehigh County Bar , the National Council on Aging and the Lehigh Valley Military Affairs Council. He has given reverse mortgage presentations to various senior groups and others in eastern and central Pennsylvania, including county bar associations and officials of the PA Department of Banking in Harrisburg. Mr. Krajsa does not offer legal advice but will work with you and your advisors to help determine if a reverse mortgage is right for you. Tiffany Shutta, Processing Coordinator, has over 14 years of FHA mortgage experience.
We are among the small number of Pennsylvania lenders that are proud members of the National Reverse Mortgage Lenders Association (NRMLA) and subscribe to the NRMLA code of ethics. We have appeared live on local radio continuously since 2005.
Hear about us weekday mornings on Bobby Gunther Walsh WAEB radio and Saturday mornings 9AM to 10AM on Gene Dickison's More Than Money WAEB AM790 WAEB.COM.
John Krajsa and Tiffany Shutta
Licensed by Pennsylvanis Department of Banking as a Loan Correspondent. FHA approved Loan Correspondent
Home value: $118,000, Qualified for line of credit or lump sum of $70,655 or monthly income for life of $454. They combined a reduced line of credit or lump sum of $30,000 with reduced monthly income of $254.
Mrs. Kerns: “We’re thrilled. We tell everyone about it. It’s completely changed our lives.”
