NLIC.org

Toni Said:

If one owes $45,000 on a house worth $80,000 how much would be gained from a reverse mortgage at age 72?

We Answered:

Hello Dee,

Using the scenario you provide, a 72 yr old person with a home worth $80K and owing $45K, the person would qualify for a Gross Amount of $50,800 (63.5%). Now from that amount you subtract the amount owed ($45K) and the closing costs which in this case is $1,600 in upfront Mortgage Insurance Premium (MIP) and your typical closing costs that you have with any type of mortgage, (atty. fee, title exam, appraisal, title insurance etc.) which not knowing where your from we'll use an average of $2500. So Dee, the end result is the $45K is paid off and the borrower will get a check for $1700 at closing. ($50,800 - $45K - $1600 - $2500 = $1700)

These numbers are based upon a HECM Fixed Rate Reverse Mortgage with an interest rate of 5.49% with zero dollar origination fee and zero dollar monthly servicing fee.

For disclosure purposes I am a Reverse Mortgage Consultant with 5 years experience and work for for one of the top 5 Reverse Mortgage Banks in the country.

Dolores Said:

what is meant by reverse mortgage? At age 62,?

We Answered:

If I am understanding Dagger accurately, he is incorrect. The payment for your home is either an annuitization of the current value of your home, or some portion of it, over your life expectancy; or a lump sum payment based on that annuity. In either case, you never surrender your home prior to your death.

He is somewhat correct in that the value of your home upon which the loan was based is surrendered upon your passing. If the entire home value is mortgaged, which is usually not the case, the bank then owns your home unless your heirs wish to finance it. If only a portion of the home's value is mortgaged, that portion must be bought back from the bank in order for heirs to retain the home. Otherwise, the home remaining home value is liquidated as part of your estate.

Added: A reverse mortgage is no more of a "rip-off" than any other financial strategy. Its appropriateness is based on one's specific scenario. For some, albeit a minority, there is no better solution available.

Curtis Said:

home paid off,is reverse mortgage smart,age 72.?

We Answered:

It might, but I would need to understand your entire financial picture to make the call. I would suggest finding a Certified Financial Planner (CFP) in your area that is a fee only planner (i.e. - they don't also sell investments). They can give you an unbiased opinion.