Your Questions About Reverse Mortgage

Chris asks…

How can someone find out if a relative got a reverse mortgage on their home?

admin answers:

Obviously you can’t ask them! If you have a friend that is a Real Estate Broker, they have access to certain types of data bases that you and I cannot check — Have R.E. Check by address of house for current name of mortgage company. Not all mortgage companies handle R.M. – these are Federal charter banks. By the name of the Mortgage company you will know if its a R.M.

Maria asks…

Does anyone know how a “REVERSE MORTGAGE works?

My mohter in law wants to take out a reverse mortgage on their house. They own it free and clear and they are both retired. They want the money to travel, vacation etc.

someone told me that it is not very cost effective and that they should just re-fi.

Any info on this subject would be helpful.

admin answers:

First of all, you have to meet a certain age limit to be qualified for a reverse mortgage. Depending on the program or lender would determine the age limit, however I do believe it starts at retirement age.

Secondly, the lender will only payout to a certain percentage of the value of the home. Again, this depends on the lender and the program. Most will perform to 50% of the value of the home. I have seen some as low as 40% with some being as high as 60%.

Third, the monthly income would determine the life expectancy of the individual. If the person is 66 years of age with a life expediency of 85, then there is 19 years that they will receive payment (as long as they do not exceed the value threshold).

So the example would be this:
Example 1
500,000 value owned free and clear
250,000 dollars allowed to be drawn on
1,094.49 dollars in income(19yrx12m=228m/250,000 dollars)

Example 2
500,000 value w/ 100K lien
150,000 dollars allowed to be drawn on (100K-250K (50%))
657.89 dollars in income (same formula as above).

Each time a payment is conducted, you will incur interest on that payment that will be compounded monthly. Hence the reason for the low LTV (loan to value) ratio.

Once the borrower passes away, you will have a certain amount of time to repay the lender back. In most cases it will be 90 days once it has gone through probate. Repaying back the loan with in 90 days either through selling the property or refinancing the property if you decide to retain the property.

Another item that you will want to consider will be the closing cost of the reverse mortgage. Closing costs are typically much higher than your traditional mortgages. In some cases it might be double to triple the normal cost. Again, that depends on the lender that you work with.

I have worked with a few people that where looking into the reverse mortgage program, that ultimately decided to finance using another program that is not a reverse mortgage. Ultimately it coomes down to cash control. You need to find a program that allowes the freedom of cash control to obtain your goals (traveling and enjoying the remaining years of your life). However, you do have a lot of home work to do in researching your options.

Contact me directly if you have any questions. Hope this helps…

Linda asks…

How do I go about getting a reverse mortgage?

And how do they work?

admin answers:

A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older. More information about reverse mortgages can be found here……



Richard asks…

What is a ‘Reverse Mortgage’ and is it a good thing to do. Pros and cons please.?

I see it advertised on TV. Has anyone done it? Were you happy with your decision later? How will it affect my taxes?

admin answers:

I read some of the answers and cant believe the information coming out. Your best resource is to go to the AARP website and get the real facts. It is for anyone who is over 62 and you have to have equity in the home. If you currently have a mortgage then it either has to be paid off prior or the Reverse Mortgage will pay it off. You have choices of how to receive the available money, fixed monthly amount, fixed lump sum payment, or an open check book to the amount allowed. The older you are the more you can use. It is FHA insured and you still keep the ownership of your house. The only time the mortgage needs to be paid is if you move out of your house for a period longer than one year. It is for the seniors who need additional income, or that grandparent who wants to help a child or grandchild buy a home, go to school to name a very few reasons why they are beneficial. What about someone who is leaving their home to a charity, why not do a reverse mortgage and see the fruit of the donation while you are still a live. Why not do a HELOC? Because if you use the money under a HELOC then you will have a mortgage payment. If you do a reverse mortgage and use the money you do not have to pay it back unless you move out of the house. If you are in California email me and I will send you the brochures. The only thing negative about a Reverse Mortgage is the initial cost that is rolled into the loan. Depends where you live but you will not be able to have access to the total value of your home.

John asks…

I have a reverse mortgage and was wondering if I can use home improvements on my 2007 income taxes.?

If I can deduct my improvements, what deductions can I use?

admin answers:

No, home improvements are not tax deductible. You add them to your cost basis. That will reduce your gain when you sell and any capital gains taxes due at sale time, if any are due at all.

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Your Questions About Reverse Mortgage Lenders

Daniel asks…

heirs and reverse morgtage upon death of home owner?

Is there any law when the heirs of a home with a reverse mortgage loan don’t let the lenders know borrower died and continue to receive the monthy payments and live in the house.what is the punishment

admin answers:

That would be rather stupid. Why wouldn’t they just sell the home, and then get a lump sum for the equity?

A reverse mortage is just a loan against the equity, so they are just borrowing against their own money, and then paying interest on it. Reverse mortages have fixed terms as well, even if the person who took out the loan when ther term expires, then have to pay the mortage back in one lump sum, usually by selling the home.

Joseph asks…

capital gaines taxes and no money will be made from the sale of our fathers home?

no profit will be made from the sale of our fathers home 1ST mortgage and 2ND ( some kind for reverse mortgage ) has to be repaid to lenders , Brother says we have to pay capital gains taxes . I know he is full of it ! He also says we don’t have to repay the 300.00 2ND ( reverse mortgage ? that paid my father 5,000 each month for 3 years ) and for 6 months that my brother cashed anyway after Dad died

admin answers:

Whoever is the executor of your father’s estate should be using an estate attorney to advise him/her on these matters. You won’t get informed advice here. However, any taxes due on the estate’s assets are paid for by the estate prior to final settlement. Heirs are not taxed directly.

Susan asks…

A lot of people think, to take some of the spotlight off of Barack Obama?

A lot of people think, to take some of the spotlight off of Barack Obama, that John McCain will announce his vice presidential choice this week. And most think it’s gonna be Mitt Romney. See, I don’t know. You know, when Romney and McCain stand together, doesn’t it look like one of those slick Countrywide lenders trying to trick your grandfather into reverse mortgage
what do you think?

admin answers:

I think most Americans are going to reject McCain/Mitt and their lobbyists friends.

Richard asks…

How do reverse mortgages work, in simple terms?

I must be stupid or something, but I’ve been reading about reverse mortgages and I just can’t seem to understand the concept.

My boyfriend’s dad just decided to do it. He has some mental illnesses and tends to get taken advantage of, particularly in regards to money. Unfortunately his wife passed away last year. Essentially, what is a reverse mortgage and what does that mean for my boyfriend (in simple terms, please)? Why are you given money? What’s in it for the lender? Will the house still go to my boyfriend if his father passes away? Does this cause you to go further into debt?

I believe he bought the house 25 years ago for $80,000. I estimate it’s worth $120,000 now. Pretending he still owes $30,000 for it… what does that situation look like?

admin answers:

My peers are partly correct.

A Reverse mortgage is exactly what it sounds like; instead of the
borrower making monthly payments to the lender after getting
a lump sum payment……the lender lends the borrower a fixed monthly payment. NO payment is due to the lender till the
end of the mortgage when either…….
The borrower has died and the estate does not want the house
so the lender forecloses.

Or……….the insurance if there is any, pays back the
lender and the house is debt free to the estate.

Or, if the borrower lives long enough, at the end of the
mortgage life [loan], he needs to re-finance
the home so that the lender is paid back.

Mandy asks…

How often does Soc. Sec. reverse a “favorable” decision?

We receive disability.

My mortgage lender goes “Oh my, your case is reviewed in a mere two yrs instead of three yrs!!”

“OH MY!” indeed!!!

Am I correct to fear that they may reverse my case? Wouldn’t logic conclude that a reversal of the original decision (by a judge) was “wrong” and that I would be responsible to pay back money from like fraud or something?

It’s not fraud.

I’ve owed (and went bankrupt) over $20,000 medical bills. I’ve been institutionalized at 2 times for over a month each, and once for a week (on a few different hospital stays.).

I’m trying to buy a house. should I use my $19,000 settlement for a $19,000 problem fixer upper house, or should I resort to making payments -like most grown up adults tend to do- for the rest of my LIFE?! Put down payment on a $60,000 house? I fear losing my source of income (disability)!!!!!!!! I could have a no payments need problem house. (is it a “problem”? I don’t know. I’ll need the structure guy, the pest control official, and the septic Environmental healthy guy to deem the place “livable” … ) anyway, believe it or not, the cost would be the same :

$44,000 (if you add the potential problems: new roof expense 12,000 $ in 2 yrs, in 3 yrs maybe new septic at $10,000) or should I buy a
“perfect” $60,000 house With a new roof already on it? I put down my $10,000 or $19,000 and get $6000 back from the Gov Obama house stimulus (yes I qualify. I had to make a lot of phone calls, as I do not even FILE taxes, but Yes, I CAN file a “tax amendment” to receive back the gove. $6000 on my $60,000 house)

do I need to fear losing my disability claim?????

I’m Manic Depressive Bi Polar…. documented. It will never go away… but… I have sporadic periods of work history and NOT so good work history! I’ve even worked (what some people call “high stress”) high responsibility bank teller jobs. I was the “assistant job set up person” in a factory (by default. None of the older gentleman wanted to learn the computer.I’m young. I’d love to learn the cpu.).

what are your thoughts on this?

(I’m not going to fix the roof myself, I’d hire someone.) but you know what, that $60,000 new roof house will not be so “new” in 30 yrs. I’ll have to replace it in 30 yrs!!!!!!!! Good Grief!!!!!!! Does this ever end?
I plan to pay $19,000 cash for the house, and save $800 per month towards the roof. In 1-2 yrs we could pay someone to fix it. Same for the septic, in the next 4 yrs we will fix that one. There are too many people living in the house, taht is the problem. A small woman and small baby will use less septic than three adults and a child currently there.

admin answers:

The problem you will run into is that if you buy a fixer upper, you take the risk of not being to qualify for a $12,000 loan for a new roof since you will also owe $44,000 for the loan of the house. It will be hard to qualify on disability for two large loans. You should go for a home that is as problem free as you can find it. Most people put down 20% when purchasing a new home. You also will have the occasional repair such as heating/air expenses and even replacing the units which costs around $3000. Then there is the hot water tank about every 10 to 15 years. Also appliances break down and need repairing. Then there is the plumbing when it goes on the blitz, and you will have the added repair of the septic tank.

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