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Old 02-03-2010, 08:17 PM
 
Location: State of Superior
8,628 posts, read 13,900,224 times
Reputation: 2770

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I would like to address reverse mortagages , see the hype every day on TV yet , very little discussion about them. Any comments out there ?

I have a friend who is 68 , wife only 61 , they have been building a retirement home for three years ,paying cash, not done yet , ( they are are living in it ). They need about 50,000 to finish, ( to get a CO ) and pay off land contract which is due in 3 months..another 40,000 .. banks won't talk to them for a mortagage , ( low credit score ), they are not sure what to do... he is retired , she is self employed , any advice ? Is this a good time for a reverse mortagage ? They have about 300,000 cash invested , about the value of their build these days, in a poor market , I would guess.

What should those people do , who have lots of equity, little savings , and have less than perfect credit.....and or are retired on fixed incomes ? I have found this is not uncommon in rural America. throw in health care issues for some Seniors , and...well , the problem only gets worse.
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Old 02-03-2010, 08:43 PM
 
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Unique situation. If I understand what you are saying I do not believe these folks would be good candidates for a reverse mortgage. Typically the amount of equity that folks have in their home is key to determining the potential value of a reverse mortgage. Sounds like these folks may not have much equity at all.

If they have another home besides the one that they are still working on (but living in) perhaps that property has enough equity for a RM on it to make sense, but the wisdom of using a RM on one house to sink money into another is debatable..
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Old 02-03-2010, 08:52 PM
 
Location: State of Superior
8,628 posts, read 13,900,224 times
Reputation: 2770
Quote:
Originally Posted by chet everett View Post
Unique situation. If I understand what you are saying I do not believe these folks would be good candidates for a reverse mortgage. Typically the amount of equity that folks have in their home is key to determining the potential value of a reverse mortgage. Sounds like these folks may not have much equity at all.

If they have another home besides the one that they are still working on (but living in) perhaps that property has enough equity for a RM on it to make sense, but the wisdom of using a RM on one house to sink money into another is debatable..
No , they do not have any other place to live. they put all their savings into building their retirement home. They own the home , so the equity is 100 per cent less the land contract 40m now due.
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Old 02-03-2010, 09:36 PM
 
28,441 posts, read 71,116,466 times
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Equity is NOT calculated by how much "was put into the house" but "present value of the house if it were to be sold today".

Sadly I have seen MANY houses that have hundreds of thousands of material & labor into them but as they are unfinished there market value is a fraction of that. If this describes your friends they are in a situation that does not work for a reverse mortgage.

Now if the "$50,000 they need to finish" is for the furniture and artwork then maybe they can try and get a reverse mortgage, but if the place needs finish flooring, bathroom fixtures and appliances...
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Old 02-04-2010, 04:30 PM
 
Location: Plano, Texas
1,676 posts, read 6,471,558 times
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As Chet said, if the home is not complete they will not be able to secure a reverse mortgage. If it is complete, one nice benefit of a reverse mortgage is that there is no qualifying. Credit scores, job, assets dont matter.
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Old 02-05-2010, 07:23 AM
 
Location: State of Superior
8,628 posts, read 13,900,224 times
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Quote:
Originally Posted by VictorBurek View Post
As Chet said, if the home is not complete they will not be able to secure a reverse mortgage. If it is complete, one nice benefit of a reverse mortgage is that there is no qualifying. Credit scores, job, assets dont matter.
They are aware of the aprasial issue with a home that is not complete. However , I think the intended is to finnish enough withi the year , in order to apply for a Reverse Mortagage...... They also wondered if all outstanding construction bills must be paid off before applying ? Would that also apply to the Land Contract ?
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Old 02-05-2010, 08:16 AM
 
Location: Salt Lake City UT
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They can apply before the construction bills & land contract are paid off, but of course they will be paid from the proceeds at closing. One comment about the wife. If they can wait until she is 62 then she can be put on the loan and not have to worry about the house money wise if her husband dies before she does. They will get less out because the amount of the loan is based in part on the youngest person's age, so less money at 62 than at 68.
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