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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