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Old 06-15-2013, 10:47 AM
 
78 posts, read 86,159 times
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my information in previous posts is already outdated. there was a major change recently in the market- and more to come. good advice above me- use a patient advisor that will explain things. this program is not right for everyone so don't get pushed into it. however if used right it make sense in a lot of situations.
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Old 06-15-2013, 11:04 AM
 
78 posts, read 86,159 times
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another interesting aspect of reverse mortgages which i'm not sure has been brought up yet is the credit line growth rate.

if when taking out a reverse mortgage the borrower leaves money in a credit line, the credit line increases every year by a factor of 1.25% above the adjustable interest rate. so if/when rates go up, so will the growth rate on your unused credit line. even if property values go down, your unused credit line goes up.

remember mortgage companies get compensated by the size of the loan. they want you to take money as opposed to leaving it in a credit line. don't do it. if you don't have an immediate need for some/all of the money, leave it in the credit line. no point putting money in your savings and being charged int on it when it could be growing in a credit line.

the credit line growth rate also affects the monthly payment option. if your main goal in taking out a reverse mtg is for the largest tenure payment, the lender should be showing you an option with a higher interest rate margin. a 3.00% margin will yield higher lifetime payments then a 2.5% margin. the tradeoff obviously is your debt is also growing at a faster rate.

if you work with an honest, experience loan officer, they will take the time to understand your situation and what your goals are. that way they can not only recommend the best program, but how to use it as you age.
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Old 02-10-2018, 07:52 AM
 
1 posts, read 340 times
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Can you do reverse mortgage if your house is fully paid?
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Old 02-10-2018, 11:08 AM
 
Location: Cary, NC
31,648 posts, read 55,401,531 times
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Quote:
Originally Posted by dvnaberam View Post
Can you do reverse mortgage if your house is fully paid?
Yes.
If a reverse mortgage meets your needs, you will get the largest payment(s) from a completely paid off home.
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Old 02-12-2018, 11:35 AM
 
3,322 posts, read 7,267,064 times
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Quote:
Originally Posted by dvnaberam View Post
Can you do reverse mortgage if your house is fully paid?
What are the age(s) of the owner(s), and how much could the house sell for if you had to sell it in the nest couple months?
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Old 03-03-2018, 08:09 PM
 
Location: Boise
571 posts, read 529,133 times
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Good info by the usual mortgage pros that reply here.

I'm a HECM specialist and my colleagues have to refer them to me. Its the most complex residential loan out there.

There is so much misinformation and outdated info that its no wonder people have a negative perception of the program. If you haven't looked at once since 2015, you really need to get current info.

Find a local source you trust, the previous poster about the call center RM lenders. They're not that good and they're pushy, something you dont do to seniors. Your heirs will need someone to work with when they are dealing with your estate.


Not mentioned much, is the 2 percent Mortgage insurance premium fha charges. This is how they can make it a non recourse loan, it doesn't affect the heirs or the rest of the estate. Furthermore, it ensures that any payments or the line of credit cannot be cancelled regardless of the homes value. Remember 2008 and how many people got their helocs called?

Yes, it can be a loan of last resort. In those cases, we are helping people not have to choose between medicine and food.

If you're 62, its the best time to get one as the power of time will grow your line of credit, it would double in about 14 years at current rates. For those people, it becomes a cash management tool rather than a last resort.

I'm getting mine when I turn 62. I think my fellow baby boomers will need this tool to keep from running out of money before they run out of life.

Not selling, but educating. Good luck.
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Old 03-04-2018, 04:47 AM
 
1,528 posts, read 729,987 times
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Quote:
Originally Posted by mortgageboss View Post
Good info by the usual mortgage pros that reply here.

I'm a HECM specialist and my colleagues have to refer them to me. Its the most complex residential loan out there.

Not mentioned much, is the 2 percent Mortgage insurance premium fha charges. This is how they can make it a non recourse loan, it doesn't affect the heirs or the rest of the estate. Furthermore, it ensures that any payments or the line of credit cannot be cancelled regardless of the homes value. Remember 2008 and how many people got their helocs called?

If you're 62, its the best time to get one as the power of time will grow your line of credit, it would double in about 14 years at current rates. For those people, it becomes a cash management tool rather than a last resort.

Good luck.
Quote:
Originally Posted by anicon View Post
another interesting aspect of reverse mortgages which i'm not sure has been brought up yet is the credit line growth rate.

if when taking out a reverse mortgage the borrower leaves money in a credit line, the credit line increases every year by a factor of 1.25% above the adjustable interest rate. so if/when rates go up, so will the growth rate on your unused credit line. even if property values go down, your unused credit line goes up.

remember mortgage companies get compensated by the size of the loan. they want you to take money as opposed to leaving it in a credit line. don't do it. if you don't have an immediate need for some/all of the money, leave it in the credit line. no point putting money in your savings and being charged int on it when it could be growing in a credit line.

the credit line growth rate also affects the monthly payment option. if your main goal in taking out a reverse mtg is for the largest tenure payment, the lender should be showing you an option with a higher interest rate margin. a 3.00% margin will yield higher lifetime payments then a 2.5% margin. the tradeoff obviously is your debt is also growing at a faster rate.
[quote=Phil McNaste;26921549]
Quote:
Originally Posted by anicon View Post

inspite of what your loan officer will tell you, interest rates and margins can be negotated with the lender. i've seen fixed rate hecms from 4.25%-5.56%. I've also seen margins on the adjustable rate hecm's from .5-3.5.

I am seeking a RM (HECM Saver-ADJ) and can't seem to find any lenders with margins lower than 2.25%. Anicon, where might I look to find the low margins you have encountered (i.e., margins on adjustable rate hecm's from .5-3.5%)?

Also, it seems there is no "Lending Tree" or "Bankrates.com" equivalent for RM's to really shop these numbers. I have to go thru the whole scenario individually with every street corner RM broker to get any figures.
Quote:
Originally Posted by anicon View Post
to the best of my knowledge, most lenders are currently at 2.25 margins on libors. but hey you never know, you might get lucky and do better. the really low margins i saw were a few years ago thru bank of america.

you might still get the lender to lower or waive origination fees on that program, especially if you have a competing offer. i've also seen pretty big differences in 3rd party closing costs, so get 2-3 offers at the same home value and compare.
Quote:
Originally Posted by anicon View Post
according to government calculations you're wrong. and where you're getting 7% interest from I have no idea.

the big unknown in your scenario is what the house will be worth 10 years from now. it could be double, it could be half, it could be the same.

according to my calculations (300K home value, 62 y/o borrower, fixed 4.99% int):
borrower will walk away w/ approx 170k in cash. for reverse mortgages hud projects home value will increase on average of 4% a year. therefore according to a typical reverse mtg amt schedule this home would have no equity remaing in loan year 22, which is when the borrower would be 82. i "think" this is about the estimated life expectancy of the borrower.

HOWEVER- if you don't take into account future home appreciation- you are almost correct. according to the amt sched i just ran the loan balance in this scenario would double in approximately 12 1/2 years.

these loans were't designed for a 62 year old to take a full draw.

interestingly enough. if you take the same set of factors, but instead of the 62 y/o taking the 170k in cash, they left the entire amount in the growing reverse mortgage credit line, you'll have about double what the home was originally worth avalable in the credit line in about 22 years. which could be more then what the home is worth at that time.

if you would have taken an adj rate reverse 6-7 years ago and left all the money in the credit line, you'd be a very happy camper right now
Quote:
Originally Posted by anicon View Post
the fees in that example seem high.
there are 3 parts to reverse mortgage closing costs:
1- origination fee. anywhere between 2500-6000 depending on home value. calculated by charging 2% of the first 200K of home value, then 1% of value over 200K. as other posters have said, this fee is negotiable. especially if you opt for the fixed int rate.

2- Mortgage Insurance- 2% of the appraised value of the property (unless property value is over 625,500- then the mip is based on 2% of 625,500). This fee goes to the fha not the lender. it makes the loan non recourse.

3- third party closing costs- title insurance, notary fees, recording fees, appraisal, mortgage counseling, ect. you can shop for your own providers for these to save money.

there is also a program called the hecm saver. instead of a 2% mortgage insurance fee, you pay .01%. the trade off is you get less proceeds avalable to you.

inspite of what your loan officer will tell you, interest rates and margins can be negotated with the lender. i've seen fixed rate hecms from 4.25%-5.56%. I've also seen margins on the adjustable rate hecm's from .5-3.5.

banks make more money if you take a fixed rate, so they'll be more willing to eat fees. however in order to get a fixed rate, you need to cash out everything you qualify for- which isnt the best option for some people.

when the borrower no longer occupies the home, the heirs can either refinance and keep the property, or sell it to pay off the mortgage. if more is owed on the mortgage then the home is worth, heirs can just walk away. this is what the mortgage insurance covers
Yikes. My personal rule is that the more complicated a financial product is, the faster I run away from it.
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