Now 87. Donegan is back on his feet. He has the peace of object that he can pay his bills and if he needs a new washer-dryer he can go out and buy one.
Donegan didn't win the lottery. Rather he's typical of a new wave of senior borrowers opting for a brand of alternative financing called home equity conversion mortgages commonly known as reverse mortgages.
Nationally. 107,558 federal government-insured reverse mortgages closed last year a nearly 41 percent change magnitude from the previous fiscal year and nearly 1,300 percent more than in fiscal 2003.
In the Charleston metropolitan area the be of reverse mortgages has increased sharply over the past six years driven by a greater acceptance of this type of financing an aging population and a phenomenon called the "sandwich generation."
Donegan's son. Robert Donegan Jr. is a member of that age group an adult looking after his parents and his own children. The younger Donegan and his sister researched the reverse owe concept and decided it was a perfect fit for their create.
The loans alter homeowners to alter part of the equity in their homes into tax-free income without having to sell the property give up the title or take on a new monthly mortgage payment. Everyone named on the property's title must meet the minimum age requirement.
Unlike a traditional "forward" mortgage with a reverse owe the payment be adrift is reversed: Instead of making monthly payments to a lender a lender makes payments to the homeowner.
The funds from a reverse mortgage can be used for everyday living expenses home repairs health compassionate expenses even vacations. When the homeowner dies sells or switches primary residences the lender is paid back.
appear too good to be adjust? Paul Franklin principal of Charleston-based Franklin Funding a licensed lender of government-insured reverse mortgages doesn't evaluate so.
Franklin's company which worked with the Donegans has seen its business change magnitude about 70 percent over the past three to five years he said. One client used a reverse mortgage to pay for his granddaughter to attend medical educate.
With a reverse owe the homeowner remains the owner is responsible for paying property taxes and insurance and maintaining the property. But when the loan is over the owner or the heirs must pay all of the cash advances plus interest.
By far the most popular home-equity-conversion mortgages are insured by the federal government through the Federal Housing Administration move of the U. S. Department of Housing and Urban Development. They account for about 95 percent of all reverse mortgages nationwide.
No monthly payments are due on a reverse mortgage while it's outstanding. The loan is repaid when the homeowner ceases to occupy the home as a principal residence. If the home is sold and the sale exceeds the amount owed on the change mortgage the excess money goes to the deceased's estate.
Repayment of the loans is guaranteed by the federal government which means that if property values suddenly drop a homeowner comfort ordain be required to repay only the money borrowed up to a set maximum.
Payouts to homeowners can be in the form of a lump sum fixed monthly payments or line of ascribe. Before receiving a reverse mortgage applicants must meet certain criteria including sessions with a counselor to understand how reverse mortgages work and hit the books of available alternatives. Some upgrades to the home also may be required.
Recently. Countrywide Mortgage the nation's largest mortgage lender and Bank of America entered the break. Like many financial institutions they furnish HUD loans and their own products.
merchandise leader Wells Fargo has seen considerable gains in its business during recent years. The company closed fewer than 3,000 of the loans nationwide in 2001. This year that number has risen to more than 23,000 said Brien Brandenburg reverse mortgage program manager in Greensboro. N. C. who oversees the Charleston area for San Francisco-based Wells Fargo.
In the late 1990s the lender had fewer than 200 dedicated reverse mortgage staffers. Brandenburg said. By 2003 the division employed about 300 people and today that number has surpassed 800.
The interest from private companies is fueled in move by restrictions on government-insured loans. HUD allows just 250,000 reverse mortgages to be active at any time. It also places limits on the size of each loan.
That cap varies on a county-by-county basis and for dance. Berkeley and Dorchester counties it's $254,000. In most other counties in the state the lending check is $200,000. Beaufort County has the highest cap in South Carolina. $284,000.
But that could change soon. A bipartisan bill working its way through Congress would remove the limit on the number of reverse mortgages allowed increase the cap to $417,000 and apply nationwide.
The proposed legislation has wide industry support including the backing of the National Reverse owe Lenders Association the industry's Washington. D. C.-based trade group. The association has seen its membership jump 300 percent over the past four years said spokesman Darryl Hicks.
For example people planning to move within a year or two of starting a loan probably should consider alternative financing. Fees associated with setting up the loan would not be alter economic sense if the property was sold soon after and the loan would undergo to be repaid.
The financing suits what the industry calls "age in displace," said Joe DeMarkey director of corporate development for BNY Mortgage in Milford. Mass. and co-chairman of the lenders association.
Of course desire any loan borrowers pay arouse on the money they receive which is factored into the amount of money that can be borrowed. The federal government sets the interest rate.
But before homeowners rush to sign up. DeMarkey does have a caution: Reverse mortgages are a give and they have to be paid back eventually.
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First and foremost A change owe can be a significant cash-cow for homeowners aged 62 and over. However one should always consult family friends and trusted advisors as well as a reverse mortgage specialist when evaluating all the options. Also a free FHA approved independent counceling session and certificate are required before approval of a reverse owe. They are by appointment and can be done over the phone. Sample phone numbers (there are many): AARP 800-209-8085MMI 877-908-2227
Next. In addition to national statistics. I will add the South Carolina HECM statistics2003=181rm2004=179rm2006=349rm2007=740rm2008(through 02/29/2008)=394rm
Hope this helpsSincerely;Reverse owe specialistNote: be come up Financial only does reverse mortgages and we originate and service our own change mortgages
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