Everything about reverse mortagages
In my 40+ years in the mortgage industry I’ve spent the last 14 years focused only on Reverse Mortgages. That’s all I do! It has been very rewarding to have watched the industry grow and change for the better, year over year, enabling my clients to achieve the financial freedom a Reverse Mortgage can bring. So, let’s get started! Question; Who owns the home?
You and only you own the home. The lender does not. Just like a standard mortgage there is a lien recorded but unlike a standard mortgage, a Reverse Mortgage is called a “non-recourse” loan which means that the house is responsible for repayment of the loan, not you personally! Since you are not required to make a monthly payment, you can never be late or fall behind in payments, eliminating financial stress and freeing up monthly income. Your only responsibility is to pay property tax and insurance and keep the home in good repair as your primary residence. Even the taxes and insurance may be paid by the loan if requested and equity allows!
Question; My home is worth way more than the loan amount. What about the equity?
Since you own the home, you also own all the remaining equity and future growth in value of the property, year over year.
As a typical Reverse Mortgage is less that 50% of the home value and current interest rates are very low, the growth in equity may be far greater than the monthly deferred cost and your equity amount may grow even without making a payment. An amortization schedule is provided to demonstrate the potential for capturing future equity growth in every proposal for a loan request. Question; How does it end?
There are three basic ways a Reverse Mortgage ends. 1. You decide to move and sell the home, just like a standard mortgage, and pay off the loan. 2. You vacate the home for more than one year which will trigger a loan stipulation that the home is your primary residence and cause the lender to request termination of the loan program and repayment. And 3.the last remaining person on title passes away. The heirs then notify the loan servicer who has been sending monthly statements and begin the process of repayment either by refinancing the loan for payoff or selling the home.
The heirs will have an initial 6 months to sell with options to extend that time for two 3-month extensions if needed.
Donald Dimitruk is a Registered Financial Consultant ® and a
Registered Mortgage Advisor and is available for a FREE consultation about how a Reverse Mortgage may benefit you at Countryside Financial Services. Please call 831.464.6464