Reverse Mortgages in Big Bear Lake

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Reverse Mortgages

Exit Realty Senior Citizens Newsletter

Short of money? Want to borrow some without paying it back?

Then a Reverse Mortgage Loan is for you. Maybe.

A reverse mortgage is another way that you can get some money from your own home. In the past, you had to sell your house or use it as collateral for a loan which had to be repaid in monthly installments.

Reverse mortgages, on the other hand, is a type of mortgage where the loan amount is not repaid as long as the homeowner is still living inside the house. The loan is only repaid when the borrower dies or permanently moves out of the house, or if the house is sold. The lender pays out the loan in three ways: lump sum, monthly payouts, or line of credit.

Reverse mortgages are a lot like wine: the older you are the better. The older you are, the more money you can get. Seniors must be at least 62 years old. The borrower must own the property outright or have only a small mortgage. He must not be delinquent on a federal debt. There are no credit or income requirements for the borrower.

The federal government has quoted these disadvantages and pitfalls of reverse mortgages:• They can affect your eligibility for another type of loan. • This may affect the inheritance of the borrower’s heirs. • The borrower could lose his or her eligibility for Medicaid and Supplementary Social Security Income.

What most people do not know is that Medicaid and SSI considers loan advances as cash assets or “liquid assets” when they are kept beyond the month that a recipient receives them. Borrowers may just find themselves ineligible for these State benefit programs.

A concern of potential reverse mortgage loan customers is, “Can the lender take my home if I live longer than anticipated?” The answer is “No," and no payment needs to be made as long as you live in the house, keep the taxes and insurance paid and maintain the house.”

How are these loans repaid? Repayment is made when the borrower dies or no longer uses the home as his principal residence. At that time, there are two choices. The borrower’s heirs can sell the house and repay the loan from the proceeds. Funds from the sale in excess of the loan amount become part of the borrower’s estate. Otherwise, the heirs may choose to repay the loan and receive a free and clear title to the property.

Falling in love later in life, when you’ve accumulated significant assets, can be complicated, especially when it comes to protecting your loved one in case your time is up before your spouse. This is especially true if you have a reverse mortgage, because if it’s jointly held in the name of you and your first spouse, your newly beloved may lose your home if you were to pass first.

The easiest way to ensure that your spouse will never be homeless is to refinance your reverse mortgage into a new one with both you and your new spouse on the title. This can only occur if there’s still accumulated equity in the home and your new spouse is older than 62. If you’re both eligible, the simplest next step would be to check with your current lender to see if they’ll do the refinance. But also consult with other lenders to make sure that you’re getting the best rates currently available.

The money you get from a reverse mortgage is not free money. All banks and lenders are in business to make money. A reverse mortgage lender is no different. When they lend you money that is secured by a mortgage on your home, they are entitled to be repaid what they lent you, plus the interest on it. But, in the case of a reverse mortgage, the lender must wait for payments of any kind until you sell the home, refinance, or permanently leave the home (i.e. pass away). It is a business transaction: you get the money, the lender gets a guarantee that they’ll eventually be repaid.If you get a reverse mortgage, you will have less equity in your home than if you did not get one. Ask a reverse mortgage lender for an amortization table to see how much less equity you will have in the future. This way you can decide if the money you'll get from a reverse mortgage is worth the tradeoff of less equity in the future.Reverse mortgages are more expensive than traditional home loans. The reverse mortgage lender, not you, is taking on the risk that you live to be 100 years old because, for that entire time, they cannot ask for a payment from you. That is a big risk for the lender and so like any good investor, they must get an increased return on their money (that they lend to you) in exchange for the greater risk. Traditional mortgage lenders start being repaid from the first month after the loan is obtained. Reverse mortgage lenders must wait for many, many years for repayment of any kind. So, they either get a higher interest rate and/or they charge higher closing costs, often in the form of FHA insurance, which you pay for, to cover their risk.. Many Reverse mortgage sales people have no idea what they are talking about. They have to "get back to you" almost every time you ask a question, or their answers sound suspect or inconsistent. They'll say and do anything to get the sale, up to and including using bait-and-switch and high-pressure sales tactics.

You usually need a lot of equity to qualify for a reverse mortgage. Reverse mortgage lenders do not offer you the full amount that your house is worth – after all, they're not buying your home. They need to leave plenty of room for interest to be added to the principle balance of the loan, so that it will not get too close to the value of the home in the future. After they do the math, this means that reverse mortgage lenders will usually only offer between 30% and 80% of the value of your home (80% is very rare). The exact amount depends on your age and which program you choose. Since reverse mortgages must first pay off any existing mortgages, if you have one that exceeds the amount you qualify for, then you will need to make up the difference using your savings. No, you can't go get a home equity line of credit or a second mortgage to do this – that would further decrease your home equity. If you don't have enough money bring your current mortgage balance below the maximum amount that you could get from a reverse mortgage, then you do not qualify.