A Reverse Mortgage removes financial
stress because, unlike other mortgages, no payment is due until the
home is no longer the primary residence of the borrower. So borrower(s)
are not required to make monthly payments.
Income and credit is not considered when
determining whether one qualifies for a Reverse Mortgage. One qualifies
if they are 62 or older, owns their home, occupy and intend to occupy
the home as their primary residence, and has enough equity to pay off
any current mortgages or liens if any. So if one has a fixed income
and/or their income is low, along with meeting the above listed
qualifications one can qualify for the Reverse Mortgage. Even with poor
credit, or a bankruptcy, and/or one is in foreclosure, if the above
listed qualifications are met they may qualify for a Reverse Mortgage.
The Loan is non-recourse, there is no
personal liability. The borrowers or their heirs are never required to
pay more than the value of the home. The mortgage is only on the
property and is not the liability of any person. So if one stays in
their home a long time and the balance due is more than the value of
the home, the borrower or their heirs are not responsible for the
difference in payment of the debt. The same is true if the property
value decreases.
Larger percentage of funds can be accessed the older a person.
The Line of Credit grows on the HECM, making more funds available for future use.
The proceeds are generally not considered taxable income and Social
Security and Medicare are not affected because it is a loan against the
property so the proceeds are not considered income.
The interest rate is usually lower than
with a conventional mortgage. The initial interest rate on the HECM
monthly adjustable rate program (the most common Reverse Mortgage
program) is based on the LIBOR (London Inter-Bank Offertory Rate) or the one-year U. S. Treasury plus a margin. For the last 15 years the LIBOR rate has averaged 5.04%.
There are no restrictions on how the proceeds can be used.
Borrower can stay in their home as long as they choose and access the cash now.
Bill
and Phyllis were preparing for the future. They did the Reverse
Mortgage to pay off their current mortgage, the credit card debts, and
to have money in their line of credit. With the money in the line of
credit when one of them passes away, the other would be able to change
the payment plan to receive monthly payments and continue to live the
lifestyle they are currently accustomed to, even without the Social
Security of their spouse.
The closing costs can be perceived as high. As with a regular
mortgage, the costs associated with the Reverse Mortgage include the
appraisal, origination fee, title insurance, escrow, and recording
fees. The FHA plan includes a 2% initial mortgage insurance premium.
Although not an initial cost, another cost is a monthly service fee.
Since one is not making monthly payments, at the time of closing, a
lump sum is set aside from the maximum principal loan amount. Each
month the service fee is taken from the amount that has been set aside.
Although the costs associated with the Reverse Mortgage are included
in the loan, they are paid up-front through the loan proceeds. Because
they are paid up-front, the shorter period of time one keeps the loan,
the more expensive it is as an annual rate. The longer one keeps the
loan, the less expensive it is as an annual rate because the costs get
averaged over the life of the loan.
When the home is sold there will be less equity for the borrower or their heirs.
The debt is rising and the equity may be decreasing
because one is not making payments. If the equity is used through the
life of the loan and one lives long enough, there may not be any equity
remaining when the loan balance is paid.
Interest is not a deduction until it is paid generally at the time the loan is being paid off. Although payments can be made and once the FHA Mortgage Insurance Premium is paid payments can be applied to the interest to receive a deduction.
Borrowers feel the
positives outweigh the negatives because they want to live comfortably,
have some "elbow room," and be independent with financial peace of mind
without being burden on their children. Usually the children are doing
fine on their own and want their parents to eliminate their financial
worries and enjoy their life more fully.
You've worked hard for your home, now let it pay you.
Call us to see if the positives outweigh the negatives in your situation.
Prestige Mortgage LLC
Reverse Mortgages SIDAC, The ExpertsExcelling In Service
651-762-9648 Toll free: 1-877-590-9648 Back to Top
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Prestige Mortgage LLC The
ExpertsExcelling In Serviceproviding Security, Independence, Dignity,
and Control by helping senior
homeowners over 62 convert the equity of their home
into cash,
Bill
and Phyllis were preparing for the future. They did the Reverse
Mortgage to pay off their current mortgage, the credit card debts, and
to have money in their line of credit. With the money in the line of
credit when one of them passes away, the other would be able to change
the payment plan to receive monthly payments and continue to live the
lifestyle they are currently accustomed to, even without the Social
Security of their spouse.
Prestige Mortgage LLC
