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George Said:

Reverse mortgage?

We Answered:

Reverse mortgage is a funding option that gives senior citizens a payout now without a mortgage payment

Reverse cashes out home value now; leaves repayment to estate, or by sale of home after death of lender

Good; instant cash with no repayment worry
Bad; estate loses house as an asset or has to repay mortgage.

Francis Said:

reverse mortgage?

We Answered:

Ok, these other folks are a bit off. Here's a more accurate explanation.

A reverse mortgage is special type of home equity loan usually for persons 62 years of age or older. Reverse mortgages allow owners to convert some of the equity in their homes to cash. As opposed to a regular mortgage, where you borrow money from a lender and pay it back over time with interest, a financial institution is making payments to you. Usually the payments are for life or for joint-lives in the case of an elderly couple. It is essentially an advance loan made against the equity in your home.

The loan does not usually have to be repaid during the homeowner's lifetime. When the person dies, the home does not necessarily go to the financial institution. The home is usually sold and some (or all) of the proceeds are used to pay the loan amount of the reverse mortgage. Reverse mortgage payments are not taxable and do not affect the homeowner's Social Security or Medicare benefits.

Gilbert Said:

Reverse Mortgage?

We Answered:

All borrowers that live in the home (generally husband and wife) must be 62 years of age or older.
A calculation is used based on the value of the home, age of the occupants, and if there is an existing mortgage on th ehome to arrive at a 'cash' value a reverse mortgage will provide.
This type of mortgage works BEST, when the borrowers are older and they own the home fre and clear.
The reason for this, the reverse mortgage has no repayment conditions until all borrowers in the home pass away or vacate the property as the primary residence.
At that time, the reverse mortgage must be satisfied. Generally, the surviving children either 'buy' the mortgage and sell the property or use the property for other reasons.
The formula used to calculate how much a reverse mortgage can provide is the closer to age 62, the lower the percentage of value. Reasoning behind this is the bank has to 'carry' that note without benefit o finterest income duringth elife of the borrowers. Since we, as a nation, are living longer, that banks expects the borrowers to live at least 20 years. That generates a percentage of value somewhere in the neighborhood of 25-30%. In your example, 200,000 would net you 60K if you had no exisitng mortgage. However, if the borrowers were 80, the formula s more favorable and the percentage would be somewhere in the 50% value range. Which again, using 200,000 would be 100K. The location of thepoerty also will influence the percentage.
As a mortgage lender, this product is used occassionally when the circumstances work. Sometimes, the borrowers are better off selling and downsizing. All options that should be considered. If you do elect this option, counseling by a third party is mandatory. All reverse mortgages are underwritten using HUD guidelines, Financial Freedom is one of the largest reverse mortgage providers.
As a bank, we sell this product. The great thing about reverse mortgage, all fees are governed by HUD, so going with one lender vs. another will not cost you more or less. So you really choose to do business with a professional that you feel comfortbale with.

Hope this helps,
Shannon
866-294-0011
Call with any questions.