A reverse mortgage is a loan available to people over 62 years of age that enables a borrower to convert part of the equity in their home into cash.

Reverse mortgages were conceived to help people in or near retirement and with limited income use the money they have put into their home to pay off debts (including traditional mortgages), cover basic monthly living expenses or pay for health care. There is no restriction on how a borrower may use their reverse mortgage proceeds.

The loan is called a reverse mortgage because the traditional mortgage payback is reversed. Instead of making monthly payments to a lender (as with a traditional mortgage), the lender makes payments to the borrower.

The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the owner lives in the home, they are not required to make any monthly payments towards the loan balance, but must remain current on tax and insurance payments.

With a reverse mortgage, the homeowner always retain title to or ownership of the home. The lender never, at any point, owns the home even after the last surviving spouse permanently vacates the property.

The homeowner is responsible for paying their property taxes, homeowners insurance, condo fees and other financial charges. Any lapse in these policies can trigger a default on the loan. To help reduce future defaults, HUD requires lenders to conduct a financial assessment of all prospective borrowers as of January 13, 2014.

Loan fees can be paid out of the loan proceeds. This means a borrower incurs very little out-of-pocket expense to get a reverse mortgage. The only out-of-pocket expense is the appraisal fee, usually a few hundred dollars.

The loan balance is composed of the amount borrowed plus fees and closing costs plus interest. The loan balance grows as the borrower continues to live in the home. In other words, when the borrower sells or leaves the house, he or she will owe more than originally borrowed. If the owner dies, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage.

Still confused? Think of it this way: a traditional mortgage is a balloon full of air that loses some air and gets smaller each time a payment is made… A reverse mortgage is an empty balloon that grows larger as time passes.

Senior housing cooperatives are an increasing popular housing option for active adults 55+. As the baby boom generation reaches retirement age and considers the many lifestyle choices available, the cooperative model is gaining greater popularity.

Cooperative living is simply ownership in a facility. Members become owners when they buy a share in the property and are then entitled to occupy a specific unit and cast one vote in all cooperative matters.

Each month members pay an amount that covers their share of the operating expenses of their cooperative corporation. As a result, there are no major financial surprises.

There are two primary costs involved in a cooperative:

• The Share Price is a one-time payment that purchases a share in the co-op. Your share entitles you to occupy a home within the co-op. It accumulates equity and is generally more affordable than buying real estate and still has the tax advantages.
• Members also pay a monthly carrying charge which generally includes: the mortgage payment, real estate taxes, operating expenses, lender required reserves, interior and exterior maintenance, sewer, water, trash/recycling, TV/cable and heat. This list varies by each individual cooperative. Members help set these budgets and the entire co-op operates as a not-for-profit.

Senior housing cooperatives are designed to be affordable, to provide peace of mind, to protect members’ investment, and is easy living. No more mowing and no more snow removal. Plumbing hassles or leaking roofs are handled by the cooperative not you.

Want to head to a warmer climate during the winter? No problem. Pack your bags and go. You are free to enjoy your life and do the things you like to do.

Minnesotans who have a tough time staying warm and safe this winter-heating season can get great information on the Stay Warm Minnesota web page at the Minnesota Department of Commerce website.

“For thousands of consumers who struggle with heating bills or need a better heating system, Stay Warm Minnesota will help them get information and resources,” said Commerce Commissioner Mike Rothman. “Stay Warm Minnesota is a one-stop shop for   consumer information for people who need to stay warm.”

Helpful information on the Stay Warm Minnesota site includes financial assistance, energy efficiency, and heating safety programs provided by the federal and state government, private industry, nonprofits, and energy utilities. Links to nonprofit organizations and government sites are listed, along with publications and tips for saving energy.

For instance, information under “Finding Financial Assistance” describes the  Cold Weather Rule and how customers can prevent having their heat turned off if they agree to and keep a payment plan with their utility. It also tells how consumers can apply with the state’s Energy Assistance Program, their utility, and charitable organizations to receive financial assistance to help pay their heating bills.

The Stay Warm Minnesota web page can be accessed here.

For more information, contact the Division of Energy Resources Energy Information Center by phone (651-539-1886 or 800-657-3710) or via email at [email protected].

Article provided by MN Department of Commerce.Energy

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