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A reverse mortgage loan is a loan where the lender
pays the monthly installments to you instead of you
making any payments to the lender. Hence the name
reverse mortgage, as the payment stream is reversed.
A Reverse mortgage enables senior citizens to convert
their home equity into tax-free income. Reverse mortgages
enable eligible homeowners to access the money they
have built up as equity in their homes. They are primarily
designed to strengthen seniors’ personal and
financial independence by providing funds without
a monthly payment burden during their lifetime in
their home. The major eligibility requirements are
that the applicant must be at least 62 years of age
and own and occupy a home as their personal residence.
The type of home that qualifies as a personal residence
can be a single family residence, town home, condo,
multiple unit building (1-4 Units), or mobile homes
with a permanent foundation built after July 15, 1976.
Co-ops do not qualify.
The best way to explain what a reverse mortgage is
and can do is to give some examples:
A 76-year-old widow has a home worth $1,000,000 with
an existing mortgage balance of $218,000. She wanted
to make some improvements to her home, but did not
have the cash flow from her Social Security and pension;
a larger conventional mortgage would not help.
A reverse mortgage paid off the $218,000 mortgage
and gave her $39,000 at close of escrow for repairs.
A credit line was then established in the amount of
$81,000 that will grow at a 5% per year rate.
A husband & wife, ages 70 & 66, were recently
married and wanted to travel. Their home was valued
at $650,000 with an existing loan balance of $20,000.
Their combined income was $3,200 per month.
A reverse mortgage paid off the $20,000 conventional
loan and established a $178,000 credit line that grows
at 6.97% per year. They can pull from the credit line
anytime they like and have the funds wired to their
account within five business days.
A 76-year-old single widow had an existing loan balance
of $145,000. Her home was valued at $600,000 and she
was getting behind on her bills.
A Reverse mortgage paid off the existing mortgage
and will provide a monthly payment of $336 per month
for as long as she lives.
A husband and wife, ages 69 & 66, had an existing
mortgage of $190,000. They could make the payments
but could not do much else.
A Reverse mortgage paid off the $190,000 conventional
mortgage and eliminated the $1,100 monthly payment
they used to make on the mortgage.
A single woman had a reverse mortgage from years ago
and wanted to fix up here lovely home in the hills.
She refinanced and created a credit line of $150,000
that grows at 7.74% on the balance she leaves in the
credit line. It is very common once a reverse mortgage
is completed to refinance in later years or every
year to access more equity. This can be done because
HUD raises the Lending Limit each year. In January
2005 HUD raised the limit $22,000. In January 2006
HUD raised the limit $50,000. Every year HUD raises
the limit on January 1st.
Examples of the benefits of reverse mortgages are
abundant but if you have a scenario you would like
to submit via email, please go to the Contact page,
and we will be happy to help you. |
