6 SECRETS OF A REVERSE MORTGAGE
SECRET #1 YOU MAY MAKE PAYMENTS ON A REVERSE MORTGAGE IF YOU CHOOSE TO DO SO.
Feel a bit “guilty” about doing a reverse mortgage and never being required to make another monthly mortgage payment again? We will indeed pay off your existing mortgage balance, thereby relieving you of budget busting required monthly mortgage payments. HOWEVER, you CAN make a monthly payment, or make a payment at any interval YOU choose, of any amount YOU choose, for no fee or penalty . This slows down the increase of the reverse mortgage balance, thereby increasing the likelihood of equity being left for your heirs. This flexibility has allowed many of my clients to go forward with their revere mortgage because they felt less “guilty” about not making any mortgage payments.
Here is an Actual Example of this WIN - WIN Solution:
Ed and Nancy were strained with a $1500 a month mortgage payment and yet dearly loved their home and did not want to sell and move into a smaller home or apartment. Ed wanted to complete a reverse mortgage to free up money from their monthly budget to enjoy retirement more with some travel plans he had long dreamed of. Nancy wanted that too but also felt “guilty” about not making any monthly mortgage payments. With lots of discussion between us about the revelation that they COULD make monthly mortgage payments, they decided to move forward with on the reverse mortgage, we paid off their existing loan balance, and they now make an $700 a month payment on the principal of their reverse mortgage. Their monthly budget, post reverse mortgage, therefore had an $800 per month liquidity boost.
If they have extra expenses for any given month, they do not HAVE TO make a payment, the decision is totally voluntary and under their control. You may make a principal and/or interest payment, depending on your tax situation, consult with your tax advisor on which option would be best for you. We provide you with a monthly statement, no monthly charge for this service, and you can monitor your payment to be certain it was applied to the loan to your specifications.
I received a thank you note from Ed and Nancy letting me know they were getting ready to take a cruise to Alaska and their retirement was now so much more comfortable.
Secret #2 Unlike a “regular” line of credt, the Reverse Mortgage Line of Credit can Never be Frozen or Closed as Long as you have a Balance Left in it.
How many people do you know who have had a conventional credit line frozen or reduced at their bank’s whim during these difficult financial times of the last 7 years? I personally know of several people and it came at the wrong time for them, that was for sure. Your reverse mortgage is insured by FHA against this practice. Call me to discuss more details.
Secret #3 Unique from a “regular” line of credit,
the Reverse Mortgage Line of Credit has Credit Line Growth Feature
If you open a revere mortgage line of credit as a safety net for unexpected expenses as you age, but for a number of years do not use it, or use only part of it, the unused balance will grow at an interest rate that parallels the interest rate on the portion of the money you have spent out of the credit line.
For example, at today’s rates on a line of credit at about 3% if you have an unused balance in your reverse mortgage credit line of $200,000, your borrowing ability will have about doubled to approximately $400,000 in ten years.
Again, you will get a monthly statement from us so you can monitor the dollar amount of growth on your line of credit.
This feature is great because if you have a goal of independence and to “age in place” in YOUR home, as you get older your need for in - home services will likely increase, the line of credit is there for you to hire whom you please to assist you in that important goal.
Many of my clients have chosen to go ahead and set up the Reverse Mortgage Line of Credit NOW, while all borrowers on title are in good health and capacity, rather then wait until “something happens” and they are pressed to the wall to complete the reverse mortgage to access the locked up equity in their home. See Secret #4 for more details.
Secret # 4 “SOMEDAY” May NOT be an Easy Option. What do I mean by this?
It is MUCH more difficult to do a Reverse Mortgage when one of the borrowers on title has become ill or lost mental capacity.
I am a senior citizen myself, and know first hand that thinking about the future possibility of becoming infirm or losing mental capacity is uncomfortable, and yet it is important to plan for this type of contingency. If you would want to help your loved one who has lost capacity to be cared at home with you, typically a long ago executed Power of Attorney MAY NOT WORK for the reverse mortgage, a full court ordered conservatorship, which takes time and money to complete, will be required so that the borrower on title who does have capacity, can go forward with the reverse mortgage to access funds to help with expenses for the other borrower on title who does not have capacity.
My suggestion is that if you think a reverse mortgage is something you may need in your future, do a revere mortgage line of credit NOW, and it will be there and accessible when the need arrives. If you never needed much or any money from the line of credit, no worries, upon the sale of your home the line of credit amount you did spend will paid off and the balance of the equity taken by you to a new home or inherited per your estate plan.
Secret #5 We the Lender do NOT Own Your Home, YOU Remain on title as the OWNER, we are simply your lender.
As incredible as it may seem to those of you who know and love the reverse mortgage loan product because it has made your retirement so much more enjoyable, the rumor still persists that a reverse mortgage lender, once the loan is complete, will be on title as the owner of your home. NOT true, we are simply a lender, just like any other lender, and when you sell the home, or all borrowers have passed away, and your heir(s) sell the home, there is a need to pay off the reverse mortgage, just like their would need to pay off a regular mortgage on your home. And just like with a regular loan, you or your heirs will keep the remaining money (equity) balance, we the lender DO NOT participate in the ownership of the remaining equity in your home.
Upon your passing your heirs will have up to 1 year without making any payment to us to sell the home or keep the home after they have found a loan of their own and paid off the reverse mortgage. Many folks do know this fact and yet every week for the last 5 years I have heard the statement made to me: “Well, you own the home of course if we do this loan”.
If that were the case I would not represent this wonderful product!
Secret #6 If you Outlive your Equity you can be Forced out of your Home by the lender.
Not So! HUD (Housing and Urban Development) sets the rules for this program that we strictly adhere to and you have an irrevocable right to stay in your home as long as you continue with normal home maintenance, your property taxes and insurance are paid current, and you live in the home for at least 6 months and 1 day per year, no matter how much equity you have in your home.
Shawna McDonald is considered an expert in reverse mortgages and has completed hundreds of these loans for her clients in the states of California, Washington, Texas and Florida. Contact Shawna if you would like to discuss how the reverse mortgage may benefit you and get your pre-qualifying numbers.