Reverse Mortgages

Dr. W asked:


My dad is 60 years old, he wants to retire in 2 years at age 62. He bought a $200k home couple of years ago, if he applies for Reverse Mortgage, does he have to make payments on his property?

Thanks

Reverse Mortgage

2 Responses to “Reverse Mortgage?”

1. PersonalFreedom Says:
   April 7th, 2010 at 2:11 am

   Create a video blog…instantly.

   There are no payments on a reverse mortgage.

   Typically, any existing mortgage must be paid off at the time of the reverse mortgage.

   You need to have a lot of (or all) equity for a reverse mortgage to be useful.

2. valstpatrick Says:
   April 9th, 2010 at 3:25 am

   Kansieo.com

   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.