Pros of Reverse Mortgages
Allows the homeowner to stay in the home
· Can pay off existing mortgages on the home.
· Simple to qualify for because no minimum credit score and generally no income requirements.
· No monthly mortgage payments are due for as long as the homeowner lives in the home and meets requirements for maintenance and paying property taxes and insurance.
· The homeowner receives payments on flexible terms:
- Credit line for emergencies
- Monthly payments
- Lump sum distribution
- Any combination of the above
· A reverse mortgage can not get “upside down” so the heirs will never be personally liable for more than the home is sold for.
· Heirs inherit the home and keep any remaining equity after the balance of the reverse mortgage is paid off.
· Loan proceeds are not taxable.
· The interest rate may be lower than traditional mortgages and home equity loans.
Reverse Mortgage Cons
The fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage because of the insurance cost. The largest costs are:
· FHA mortgage insurance
· The loan balance gets larger over time and the value of the estate/inheritance may decrease over time.
· Although Social Security and Medicare are not affected, Medicaid and other need-based government assistance
can be affected if too much funds are withdrawn (and not spent) in one month.
· The program is not well understood by most individuals. However, the availability of independent reverse mortgage counseling helps.
62+ (No Income or Credit)
“Americans are going to need reverse mortgages,” she wrote. “Most households are going to find that their retirement incomes fall short of their retirement needs and will experience a decline in living standards. Being able to tap their home equity—often their single largest asset—provides a source of income that could supplement Social Security and the income generated by their meager 401(k) balances.”
We can do a reverse even if the property in foreclosure.
Reverse Mortgage Scenarios Below are actual case examples of how FHA HECM reverse mortgages can be used.
Scenario 1
A single woman aged 62 had a home that she owned free and clear. She was self-employed and wanted more security, as work was slow, and with the state of the economy she wasn't sure when or if business would pick up again. She decided on a Fixed Standard HECM, the home was appraised at $545,000 and she received $325,000 when the loan closed. With these funds she planned to make some conservative investments, tackle some long-delayed home improvements, and supplement her income.
Scenario 2
A married couple, ages 71 and 77, had a loan balance of $410,000. The husband was getting ready to retire, but was concerned about still being able to manage a $2300/month mortgage payment on a reduced income. The home was valued at $1,200,000, but the maximum FHA claim limit is $625,500. Based on that limit, they qualified for $405,000, which meant they had to bring in about $5000 to escrow to make up the difference. They were happy to do so, because with no more large mortgage payment they felt they could finally relax and enjoy retirement.
Scenario 3
A widow, age 76, lived in a manufactured home with her daughter. She was considering a reverse mortgage to supplement her income and make some needed repairs. Her manufactured home did not have a 433A certification for being fixed to a permanent foundation. The cost to get this was beyond her means, and she was afraid she was not going to be able to get the loan. However, her loan officer helped her find a company willing to do the work needed to receive the 433A and delay payment until the close of escrow. The home value came in at $325,000 and she received $228,000 to do all things she was hoping to do.
Scenario 4
A single man, age 79, was struggling to make ends meet. His loan balance was $325,000 with a monthly payment of $1750. His fixed retirement income was less and less able to cover all his bills, and he saw the reverse mortgage as a way to stay in his home and still free up a large chunk of income. However, he could not proceed right away because he owned a condominium in a complex that was not FHA approved. With the help of his loan officer, an FHA approval package was submitted to the condominium's management company and they filled out the necessary information. The package was then submitted to FHA for processing, and after about 3 weeks the approval was granted, and the loan process could move forward. At an appraised value of $525,000 he was able to have his loan paid off and receive $80,000 in cash in addition. Not only was he pleased, so were some other neighbours in the complex who could now take advantage of the complex being FHA approved.
Scenario 5
A married couple, both 77 years old, wanted to buy a home near their daughter. They couldn't get enough cash out of selling their current home to pay for the next home in cash, and their income wasn't enough to qualify for a regular mortgage. They did, now ever, have enough money to make the required down payment for a HECM purchase. They were able to buy a $450K home close to their daughter, using $155K down payment (about 34%). The HECM made up the difference, and now they have a nice home near family with no mortgage payments at all. The wife literally said, "I feel like I won the lottery!"
Scenario 6
A married couple, ages 68 and 71, were able to make ends meet for their own needs, but their children were having financial problems. They decided to get a lump sum with a low fixed rate on their house valued at $388K, that they owned free and clear. They ended up with $240K for their bank account, which put them in a great position to help their children and grandchildren either with the occasional smaller gift, or maybe with larger amounts like for college. They figured the equity of the house was going to the kids anyway, why not make at least some of it available now, when the kids really need it and they can enjoy giving it?
Scenario 7
A married couple, both age 70, thought they were set for retirement, with several properties and a number of investments. But then he lost his job, and between that and an economic turndown, the investments were suddenly worth much less. The home they were living in was upside down in value, so they couldn't do a reverse mortgage on that home. They ended up doing a short sale on the primary residence, and moved into one of their rental homes that had equity. On a value of $195K, paying off a $91K mortgage, they got about $23K in their pocket to help rebuild their cushion, and also eliminated their mortgage payments.
Scenario 8
A widow, age 80, lived in a condo in an FHA approved condo complex. The condo needed a number of repairs and upgrades, but she did not have the financial resources to do that. A few of the repairs were necessary just to pass the FHA appraisal, and a repairman was located who agreed to do the repairs and defer payment until after the close of the loan. On a value of $355K, paying off a mortgage balance of $140,767, she received $92,651. With this money, she was not only able to pay off the repairs already done and complete others, she was able to take a trip with her daughter and have a liquid financial cushion she never had before.
Reverse Mortgage Scenarios
No Credit
No Income
Age 62 or older
Send it over and lets close some reverse
mortgages….
Manufactured Home
Ruth, 78, had been thinking for a while about getting a reverse
mortgage on her home. However, she thought that since she lived in a
manufactured home, she would not qualify for the federally-insured Home Equity
Conversion Mortgage. After talking to her specialist from Senior Reverse
Mortgage.com, she discovered that, because her manufactured home was on a
permanent foundation, she did qualify! She had always wanted be free from the
expense of her mortgage payment so that she would have the flexibility to travel
and see her family. Her home was worth $250,000 and she had a mortgage worth
$26,000 still on the property. After talking to a reverse mortgage specialist,
she found out that she could receive:
Lump Sum
$149,965
Line of Credit
$120,390
Monthly Advance
$959
After learning about her options, Ruth decided to take the money
in a line of credit. This way, she would have money to see her family and never
have to make a monthly mortgage payment
again!
FHA Reverse Mortgage For Purchase (Not in
Texas)
Pamela, 65, had sold her old farm home months ago, shortly after
her husband's passing and had received approximately $70,000 from the sale. She
was living with her daughter while looking for a smaller house that she could
maintain by herself and had found a $120,000 house in which she was interested.
She wanted to purchase the home, but did not want to have a mortgage payment.
One of her friends had told her about the website Senior Reverse Mortgage.com,
so she decided to visit it to see if a specialist would be able to help with her
unique situation.
After speaking with a loan specialist, she decided that the FHA
Reverse Mortgage for Purchase program seemed like a good fit for her. She would
have to make a down payment on the new home of about $53,033 in order to qualify
for the program. After the down payment, she would never have to make a monthly
mortgage payment again as long as she lived in the home and stayed current on
taxes, insurance, and repairs. In the end, Pamela was not only able to obtain a
new home without taking on new mortgage payments, but even had money left over
to place in college funds for her
grandchildren.
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Home Repairs Needed
Leonard, 92, was in great health, but his income was limited and
his home needed a lot of repairs. His home was worth $90,000 and he still had a
mortgage equaling $10,000 on it. He had heard about the reverse mortgage program
before, but thought that he would not qualify because of his house's value and
the repairs that needed to be done. He decided to call the number he found on
Senior Reverse Mortgage.com to see what he would have to do in order to qualify
for a federally insured reverse mortgage. After speaking to a loan specialist,
Leonard found that he did qualify for a reverse mortgage because the proceeds
from the loan could be used to repair his home! Not only that, but after paying
off his mortgage and performing repairs totaling $20,000 on the home, he would
still have money left over. He could receive the rest of the money in one of
three ways:
Lump Sum
$41,403
Line of Credit
$36,617
Monthly Advance
$562
Leonard decided that he would take the line of credit. He was
thrilled that he would no longer have a mortgage payment, his home would be in
good repair and he would have access to some extra money in case he needed it in
the future.
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Foreclosure Looming
Richard, 76, and Maria, 73, were struggling to live on a fixed
income. Their house was worth $150,000 and they had a mortgage equaling $40,000
left on their property. They had fallen behind on their mortgage payments
because they only had the money to either eat or pay their mortgage, not both.
After searching for "foreclosure solutions" on a search engine, they came across
Senior Reverse Mortgage.com. Although they were not sure exactly what a reverse
mortgage was, they decided to give them a
call.
After speaking with a loan specialist, they discovered that they
would be able to save their home from foreclosure by taking out a reverse
mortgage. The reverse mortgage would not only eliminate their monthly mortgage
payment, but also give them access to additional funds. They could receive the
additional funds in one of three ways:
Lump Sum
$55,906
Line of Credit
$38,156
Monthly Advance
$276
Richard and Maria decided that they would take the rest of money
in a line of credit. Because they would no longer have a monthly mortgage
payment, they would be able to afford their monthly expenses, but they wanted
to be able to access the money in case of emergency. Not only did the reverse
mortgage give them the freedom to stay in their home for the rest of their
lives, it gave them the peace of mind to enjoy their
retirement.
