In my previous column, I covered information about reverse mortgages and suggested that interested homeowners check the U.S. Department of Housing and Urban Development Web site for more information at http://www.hud.gov/progdesc/hecmdf.cfm. You can find my previous column at http://www.ext.colostate.edu/pubs/columnym/ymmenu.html.
Reverse mortgages are available with FHA insurance from HUD and from private companies. Good information and a list of companies that offer reverse mortgages in Colorado are available at the National Reverse Mortgage Lenders Association Web page at www.reversemortgage.org. This organization is a national nonprofit trade association for financial services companies that make, service and invest in reverse mortgages in the United States and Canada.
Although the HUD-sponsored Home Equity Conversion Mortgage, or HECM, may be less expensive than a private mortgage, there is a limit on the amount that can be financed ranging from $154,896 in rural areas to $280,749 in large cities. Private companies may be able to offer larger mortgages for qualified homeowners than those permitted by HECM rules.
Ken Tremblay, Colorado State University professor in the Department of Design and Merchandising, recommends that homeowners calculate the Total Annual Loan Cost, or TALC, for various reverse mortgages. The TALC totals up the costs associated with reverse mortgages including the origination fee, the appraisal fee and other closing costs. Lenders must disclose the TALC for reverse mortgages. You will find a TALC tutorial at www.reverse.org/talctuto.htm.
If you plan to sell your home or move in the next few years, the costs of a reverse mortgage may outweigh the advantages. Although upfront fees are typically rolled into the loan amount so you don’t have to pay them up front, they will come out of the amount you must pay the lender when you move.
At the HUD Web site, you can estimate how much money you might receive by using the HUD reverse mortgage calculator. You also will find a list of HUD Approved Counseling Agencies in each state and a list of FHA approved lenders for all states.
Another helpful source of reverse mortgage information is available from the American Association of Retired Persons. AARP offers specifications for analyzing and comparing reverse mortgages at their Web site: www.aarp.org/revmort. You can get a copy of "Home Made Money: A Consumer’s Guide to Reverse Mortgages" at their Web site or by calling 1-(800) 424-3410.
by Judy McKenna, Ph.D., CFP, Family Economics Specialist, Colorado State University, Cooperative Extension, email@example.com, 491-5772