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Show Homeowner pension plan By Danny Pawelek One lender calls reverse mortgages a "pension plan." Another calls them a "lifesaver." When a widow recently was told that she was eligible to receive $4,500 a month, said Jerry Capretta, local representative representa-tive for Directors Mortgage Loan Corp., "she just sighed in relief. You should have heard her, she almost cried." A reverse mortgage-also known as a Home Equity Conversion Con-version Mortgage (HECM) reverses the direction money traditionally flows. Rather than the homeowner paying the bank, the bank pays the homeowner. For senior citizens who are at least 62 years old and own (or owe very little on) their own single-family house, the reverse mortgage allows them to tap their equity and supplement their income while retaining full ownership. own-ership. "Essentially, they convert their home into a pension plan," said a representative of a company compa-ny that does reverse mortgages only. They can stay in their home and consume the wealth they have built up in it. The lender takes a lien on the home, and until it is sold or the homeowner dies, there are no payments due. There can be no foreclosure. The lender gets its money, including accumulated interest from the proceeds of the sale. Whatever is left over and above that amount reverts to the former homeowner or to his or her estate. If the sale doesn't net enough to pay off the loan, the Federal Housing Administration will make up the difference to the lender. The lender cannot come after the heirs. The U.S. Department of Housing and Urban Development administers the program, which was passed by Congress in 1987. HUD retains final loan approval and sets the maximum loan amount, using a formula based on the age of the youngest borrower, expected interest rate and the local maximum claim amount. The actual loan amount will vary, depending on the borrower's age, the appraised value of the home and the terms of the loan itself. Monthly payments from the lender to the borrower can run from a couple hundred to a thousand thou-sand or more. Lumpsum payments pay-ments have a similar range, from a few thousand to the maximum. Each potential applicant meets with an independent counselor who lays out the options, explains ex-plains the potential consequences of a reverse mortgage, makes them aware that the extra income may impact some of their other benefits and programs, explains that the interest rate is variable, that private mortgage insurance is mandatory and that property taxes cannot be deferred. In the end, the counselor gives them a certificate, which gets them to the next step-making a formal application. There are other qualifications, too. Property taxes must be paid. Any other liens must be cleared (although some may be paid off with money from the reverse mortgage). The residence must be owner-occupied and properly maintained. If the borrowers are a couple, the youngest must be at least 62. If they plan to be in their home for just a few more years, or if they are concerned about leaving their home to their heirs, a reverse mortgage would not be a good choice. The typical borrower, said Capretta, is a widow. "As a result, she has lost some of her income and can't make ends meet. Or there are two of them, but costs have been going up faster than their income and they've gone through their savings. sav-ings. This program is a lifesaver for many seniors. Their lives can be immeasurably enhanced if they would just take the time to look into it." Reverse mortgages have five payment plans: equal monthly payments for a fixed time period; equal monthly payments for as long as the client occupies the home; a line of credit; a line of credit combined with monthly payments as long as the client occupies the home. The line of credit has proven to be the most popular. "A little more then half take their money in a line of credit," said Capretta. They're making the loan to aug- There are people who are so much their own enemies that they prefer a misfortune they have foreseen because they have for-seen for-seen it, to good luck they did not expect. -Price de Ligne ment their rainy-day fund, to have a bank account they can tap for whatever they need." One thing that worried seniors is that the interest rate on the loan is variable, based on one- r Jfj Hi cl trMfo ivMti w v) if Sage Creek Elementary School citizenship winners are: back, from left, Amy Bennion, Casey Mecham, Casey Metcalf, Jaclyn Stokes, Ryan Lundquist and Dustin Richins. Center, Amy Findley, Jeremy Lindsay, Eric Sumsion and McKenzie Lundell. Front, Shantel Purser, Jeff Felix and Holly Bird. 4 - v4-l f fh : 4 I i - JiS 'Sill ,t M&iSS -xf!i tlf At 'tit w. lw is stSr5'-; l ull - A: Ih ) .5ir-C: money, but their estate will pay it off, not them. A book recommended for those who are interested is "Re- year Treasury bills. "That generation gener-ation wants to know what things cost," Capretta said. "But they're not going to have to pay for this. " The closing costs and $300 application fee seem like a lot of n December tirement Income on "Cashing in on Your Milt's Auto Repair is now Milt's Auto 81 Ryder Trucks! An Authorized Ryder Truck Dealership Let Milt's take the hassle out of your next move! Milt's is located at 179 W. 900 North in Springville For Reservations call 489-0853 or 1-800-Go-Ryder For local or one-way moves Ryder makes it easy for you. For unto us a child is born, unto us a son is given: ...and his name shall be... The Prince of Peace. Isaiah 9: 6 Merry Christmas to all our good friends and neighbors. Heeler Mortuary 211 . 200 So. -Springville 489-6029 21, 1994 The Springville Herald - Page C-3 the House Home With a Reverse Scholen. Mortgage"," by Kan I |