Saturday, February 28, 2009

Reverse Mortgages

Reverse mortgages come in many different forms. You should only seek out an FHA-insured Home Equity Conversion Mortgage.

These are the things that you need to know about a reverse mortgage:

How they work
How to qualify
The involvement of the Federal Government
Consumer Safeguards
Other pertinent facts

How they work

A reverse mortgage was created by the Federal Government for homeowners age 62 and over and could be considered as a financial empowerment tool. It allows you to convert a portion of your equity into tax-free cash to supplement your monthly income without incurring a monthly loan payment. Yet you still own your home and your name still stays on title.

You are still responsible for the property taxes, homeowner’s insurance and the general maintenance and upkeep of the property.

The entire loan is repaid when the home is sold or the last remaining homeowner passes away or permanently leaves the home.

As stated earlier, the proceeds of the loan are tax-free and do not affect any Social Security or Medicare payments you may be receiving. They, however, could affect Medicaid payments.
You are able to use the proceeds of the loan for any purpose, including:

Home improvements
Long Term Care planning
Debt consolidation

What is the difference between a Home Equity loan or Line-of-Credit and a Reverse Mortgage?

The answer is the in the case of a reverse mortgage you can access the equity in your home without having a monthly payment, which you would incur if you simply refinanced your home or took out a line-of-credit on the property.

How to qualify

It is surprising how simple the qualification process is for a reverse mortgage. It is a very straight forward process:

Everyone on the title to the property must be 62 years old or older
You must live in a 1-4 family residence, condo or co-op
You must be the principal resident and cannot be renting out the property.

That’s it. There are NO income qualifications. This is because you do not make payments on a reverse mortgage.

The amount of money you will receive as a result of a reverse mortgage is based on:

Your age
Your home value
The location of the home
The prevailing interest rate

You must pay of all existing mortgages when you close on a reverse mortgage, which means that you will have no monthly payment.

Payout Options

You can access the proceeds of a reverse mortgage in several different ways:

LUMP SUM-you receive all of the cash at once
CREDIT LINE-You take the money when you need it. You accrue interest only on the amount that you withdraw.
MONTHLY PAYMENTS-which can come in two ways
The term payout option-which enables you to receive a fixed amount of money for a fixed amount of time
The tenure payment option-which enables you to receive a fixed amount of money for as long as you live
You can also combine any of the above options to best fit your individual needs.
And after the reverse mortgage is paid off, the remaining equity in your home goes to your estate.

Government Involvement and Consumer Safeguards

Federal requires that you have a counseling session with an FHA approved individual counselor before submitting any reverse mortgage application to any mortgage company. The counselor will review your loan options and explore any alternatives that may be available to you. This session can be either face-to-face or over the phone.

Other Pertinent Facts

The closing costs associated with a reverse mortgage are similar to the closing costs for a refinance or home equity line-of-credit.

Due to the ‘Non-recourse’ feature of a reverse mortgage, you can NEVER owe more than the house is worth.

Because there are no payments to the mortgage company, you can never lose your home, so long as you continue to pay the property taxes, insurance and maintain the home.

You have the ability to sell the home at any time

A reverse mortgage is also an excellent way to fund long-term care, whether you wish to self-fund for such costs or are looking to fund a long-term care insurance policy.

Overall, a reverse mortgage could be a great option for senior citizens in these difficult economic times. As with any financial decision, however, you should seek out thr advice of a competent financial professional who is familiar with your individual situation and personal needs.

Mark A. Bowman

Tuesday, February 24, 2009

Bridging The Coverage Gap

Most Medicare drug plans (Part D) have a temporary limit on what they will cover for prescription drugs, or a “coverage gap.” The good news is that all Medicare drug plans provide coverage if you have an unexpected illness or injury that results in extremely high drug costs. This is called “catastrophic” coverage. It assures that once you have paid $4,350 (in 2009) out-of-pocket for drug costs in a calendar year, almost all of your drug costs above that amount are covered. If your plan has a coverage gap during the time between a drug plan’s standard level of coverage and the catastrophic coverage, you pay all of your drug costs.

If you have limited income and resources, and qualify for full extra help, most of the information here doesn’t apply to you. You will continue to pay the same copayment or coinsurance amount during a coverage gap if your plan has one.

If your drug plan has a coverage gap, here are some ways you can avoid or delay entering the gap, and continue to save money on drug costs while in the gap:

Consider switching to generic, over-the-counter (OTC), or other lower-cost drugs. Ask your doctor about generic, OTC, or less-expensive brand-name drugs that would work just as well as the ones you’re taking now. Switching to lower-cost drugs may be enough to help you avoid the coverage gap, and can save you hundreds or thousands of dollars a year.

Keep using your Medicare drug plan card, even while in the coverage gap. Using your drug plan card ensures that you’ll get the drug plan’s discounted rates and that the money you spend counts toward your catastrophic coverage.

Explore National and Community-Based Charitable Programs that might offer assistance (such as the National Patient Advocate Foundation or the National Organization for Rare Disorders). These organizations may have programs that can help with your drug costs. Comprehensive information on Federal, state, and private assistance programs in your area is available on the Benefits Checkup Website ( website.

Look into Pharmaceutical Assistance Programs (sometimes called Patient Assistance Programs) that may be offered by the manufacturers of the drugs you take. Many of the major drug manufacturers are offering assistance programs for people enrolled in a Medicare drug plan. You can find out whether a Pharmaceutical Assistance Program is offered by the manufacturers of the drugs you take by visiting www.medicare.govand selecting “Lower Your Costs During the Coverage Gap.”

Look at State Pharmaceutical Assistance Programs (SPAP) for which you may qualify. There are 23 states and 1 territory offering some type of coverage to help people with Medicare with paying drug plan premiums and/or cost sharing.

You can find out if your state has a State Pharmaceutical Assistance Program by visiting and selecting “Lower Your Costs During the Coverage Gap.”

Apply for Extra Help. If you have Medicare and have limited income and resources, you may qualify for extra help paying for your prescription drugs. Contact Social Security by visiting or calling 1-800-772-1213.

Warm Regards,

Mark A. Bowman, President
By Baby Boomers…For Baby Boomers
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