REVERSE MORTGAGES

“AN ANSWER FOR SENIORS UNDER FINANCIAL STRESS”

DAVID PRIEST

Traverse City, Michigan

I began specializing in Reverse Mortgages just over five years ago because as I began to understand these loans, I realized that if my parents had been able to use a Reverse Mortgage when they retired, they would have been able to keep their home.

Dad retired at age 65 and still owed about 10% of the value of their home.  He was concerned that still having to make the monthly payment on the mortgage, they would not be able to enjoy life the way they had dreamed.  They sold their home, which my mother had designed, and moved into a much smaller home.  I’ll never forget the look in mom’s eyes on moving day.

With a Reverse Mortgage, they would have been able to pay off the rest of the mortgage, freeing up that payment money each month, and, had an additional monthly income over and above dad’s small pension and social security check.

Their lives would have changed significantly!

SO WHAT IS A REVERSE MORTGAGE?

A Reverse Mortgage is simply an equity loan on your home.  There are no monthly payments on these loans.  The entire repayment is deferred to the time when the home is sold and there are no restrictions on what the funds may be used for.

WHAT ARE THE REQUIREMENTS?

• All persons on title to the home must be 62 or older
• There must be some equity in the home but the home does not have to be free and clear

ARE THERE DIFFERENT TYPES OF REVERSE MORTGAGES?

There are actually three types of Reverse Mortgages:

• FHA  This is, by far, the most commonly used type of loan and work best for homes up to $300,000
• CONVENTIONAL  These work for homes from $300,000 to $500,000 for borrowers over 75 years of age
• JUMBO LOANS  These usually work best for homes valued at $500,000 and above

HOW MUCH MONEY IS A PERSON ELIGIBLE FOR?

The amount the borrower will be eligible for depends on three factors:

• The age of the youngest borrower
• The appraised value of the home
• The current interest rates

HOW CAN I RECEIVE THE FUNDS?

Funds from a Reverse Mortgage may be taken all at once, paid out monthly, left in a line of credit for future use or any combination of these.  Each situation is different, and counseling is provided to assist in selecting the proper method for each borrower.

HOW SAFE ARE REVERSE MORTGAGES?

• In most cases, your monthly income check is guaranteed by FHA
• They also guarantee that you can stay in your home as long as you like
• It is also guaranteed that you, your heirs or your estate will never owe more that the net proceeds of the sale of the home.  This means that all other assets are protected

REVERSE MORTGAGE FACTS

• The borrower does not need income or good credit to qualify.
• Since the funds received are actually loan proceeds, it is not treated as income and therefore is not taxable.
• Benefits received from Social Security and Medicare are not affected and Reverse Mortgages are sometimes used to leverage Medicaid Benefits
• The homeowner must continue to pay property taxes and keep the home properly insured.
• Ownership of the home is not surrendered.  These are simply equity loans.
• Borrower’s heirs are not responsible for repayment of the loan.

Reverse Mortgages have helped a lot of homeowners improve the quality of their lives and in the right situation; they are one of the best financial planning tools available.

David Priest is Branch Manager for VanDyk Mortgage at 589 Robinwood, in Traverse City, and has specialized in Reverse Mortgages for the past eight years.

He can be reached by phoning (231) 941-1776 or (866) 931-8500 or by e-mail at davep@myseniormortgage.com