Reverse Mortgages (divorce, inherit, family, best)

[azloafer]

Originally Posted by NewToCA

So it is possible that the lender will provide a monthly total, over time, which will exceed the value of the property?

If this is true, how do they make money, considering that any equity left in a property still belongs to the owner?

This almost sounds too good to be true. I am wary. Will someone who actually has a reverse mortgage tell me what I am missing in my research. I want to know what questions I should ask that are not answered here in this info:

"To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home.

When you no longer use the home for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.

Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.

A “nonrecourse” clause, in reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid."

[NewToCA]

So what you understand is that you have an open ended funding stream, paid in monthly installments, with the liability limited to the home value?

And even if you have a million $$$ in stocks and bonds they can't tap into this to satisfy the total amount of the loan (including imputed interest)?

[azloafer]

"None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs."

I only know what it says, but I'm waiting for someone who actually has a reverse mortgage to tell me how they like it. It has to be someone who has one so that I get it straight from the source. My wife says that I like to research things to death, but I don't want to sign on the bottom line until I feel that I know it all. I would still take the papers to an attorney before signing.

ANYBODY HAVE ONE???

[bande1102]

http://www.hud.gov/offices/hsg/sfh/hecm/hecmhome.cfm Hope I can post this. This clears up a lot of misconceptions about reverse mortages.

Here's an excerpt from the site:

he HECM FHA insured reverse mortgage can be used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. The loan, commonly known as HECM, is funded by a lending institution such as a mortgage lender, bank, credit union or savings and loan association. To assist the homeowner in making an informed decision of whether this program meets their needs, they are required to receive consumer education and counseling by a HUD-approved HECM counselor.

and this part is helpful, too

Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the home is the borrower's principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. You can never owe more than your home's value.

If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD's Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage.

I don't have personal experience with them, but have read extensively for my grandma b/c she absolutely wanted to stay in the house she and grandpa built. I don't think they're a bad idea and I'd much rather she enjoy her house while she's alive. The family is still in discussion. I want her to move with me

The big issue, from what i've read, is that some of the banks/lenders are charging astronomical fees and you need to check/be aware of them. There are several different products--you really have to do your homework.

Hope this helps.

[azloafer]

Bande1102,
Please let me know what happens if your Grandma goes ahead with the reverse mortgage. I appreciate your help.

[dreamofmonterey]

They sell the house as "owners."
___________________________

Ah- so they are acquiring the property after you pay off a 30 year mortgage? Call me crazy. My great aunt died a millionaire. She had no mortgage. It was a pretty smart thing that she did. Banks can skew the numbers- I saw enough slick financing in S Florida.

sunny

[JustPassinThru]

Originally Posted by NewToCA
So it is possible that the lender will provide a monthly total, over time, which will exceed the value of the property?

If this is true, how do they make money, considering that any equity left in a property still belongs to the owner?


In answer to the first question, the lender uses actuarial tables to determine the lifespan of the borrower. Very similar to the process used by insurance companies and retirement annuity providers. If the proceeds from the sale of the home are less than the amount borrowed, the insurance policy covers the difference. The borrower pays for the insurance. No free lunch here.

In answer to the second question, there is a bundle of fees, which are usually wrapped in the loan, plus an annual service fee, an annual insurance premium, and interest on the money borrowed.

To top everything off, you are allowed to borrow only a percentage of the amount the home qualifies for, based upon your age.

In the example given where the mortgage payment was $800, if the amount included taxes and insurance, as did all of my home mortgage payments, then the net to the borrower of $1300 is not accurate.

Obviously, this program would not exist if there wasn't a need. So, if you're not concerned with the cost, want to stay in the home, and aren't worried about leaving nothing for heirs, then consider it.

[maggiekate]

Originally Posted by CAVALLERI

My Mom Is Going To Be 62 And Is Thinking About A Reverse Mortgage. Does Anyone Know If The Will Give Her One With A Judgement On The House. It Is Not A Lein. She Needs To Collect Ss But It Will Not Be Enough To Pay Bills And What Remains On The Mortgage.

a reverse mortgage comes with alot of fees, also 62 is very young still.

I would say have the house appraised, and maybe buy smaller and newer.

the older you get, the harder a house becomes, and if you need to use all your money on a house, where is the quality of life. You also have home
insurance, and taxes, and upkeep.

[azloafer]

Originally Posted by sunnyhelena

You are NOT eliminating a mortgage by getting a reverse mortgage. They are tapping into your equity. My father had one and the interest was usurious. Just trying to help.

sunny

The mortgage monthly payment is eliminated because the monthly payments are no longer made and the loan gives a monthly income. I FEEL THAT A RM IS FOR SOMEONE HOUSE RICH AND CASH POOR. We could live a decent life and not have to sit home in our house. We have investigated buying a smaller house. The problem there is that the smaller houses cost as much as what we would get in a sale of our house and that's if we were lucky because the housing market is so bad. The following is from the HUD REPORT that the bank gave me:

"To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home.

When you no longer use the home for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.

Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.
A “nonrecourse” clause, in reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid."

Why would we care about what happens to the house when we are dead or in a nursing home? Just my opinion, but the bank said this is why people get a RM. They want to travel while their health is good instead of sitting home and trapped by their money being unavailable because it is locked in the house. So far we can't find a negative for our situation.

Some posts are very negative, but we are still waiting for a post from someone who actually has a RM and is willing to give a "first hand account." We want to know if it has helped their "quality of life."

[Keeper]

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