A reverse mortgage is an important financial tool that allows retirees 62 and older to access their home's equity for a variety of reasons without the requirement of making a monthly principal and interest payment. Whether it be freeing up monthly cash flow by paying off current debt, paying for home modifications/improvements, paying for in home healthcare, purchasing a new primary residence or just funding an enhanced retirement lifestyle, as reverse mortgage can be customized to fit most any situation.
One must be 62 and older to access the equity of their primary residence. Loan amounts, called "Principal Limits" are based on the age of the youngest borrower, the fair market value of the home, and the prevailing interest rate. All underlying liens/mortgages must be paid off with the reverse mortgage proceeds and additonal borrower assets, if necessary. Borrowers can access the remaining Principal Limit by withdrawing funds at the time of closing, setting up a monthly deposit into their bank account, or creating a line of credit from which they can draw in the future- or a combination of these options. No payment for principal and interest is required as long as at least one borrower occupies the property as their primary residence. The reverse mortgage gets paid back when the last borrower leaves the property permanently. Any equity beyond the reverse mortgage payoff belongs to the borrower and their heirs. Should the reverse mortgage exceed the value of the property at that time, then they will never owe back more than the value of the property at that time.
A reverse mortgage is a home equity loan for homeowners 62 and over which allow them to take out equity for their home without making a monthly payment for principal and interest. Loan amounts are based on the age of the youngest borrower, the home's fair market value, and the prevailing interest rate. The reverse mortgage is paid back when the last borrower leaves the property permanently. Any equity in excess of the payoff amount belongs to the borrower or their heirs. Borrowers are protected from every owing back more that the value of the property.
There is no prepayment penalty with a reverse mortgage. Even though there are no required monthly payments required, borrowers have the option to do so, should they choose. If the intent is to simply "get out" of the reverse mortgage, options include paying off the existing balance with current assets, obtaining a traditional mortgage or line of credit to pay off the balance, or to sell the home, pay off the balance and keep any proceeds remaining.
Reverse mortgage loan amounts, called "Principal Limits" , are determined by a calculaton using the age of the youngest borrower, the home's fair market value and the current prevailing interest rate. The percentage of the home's value that can be accessed increases based on one's age, since the older one is, the shorter their life expectancy. Therefore, an 82 year old will have a higher Principal Limit compaired to a 62 year old for the same property value. Principal Limit percentages range from around 45% for younger borrowers, up to 65% for those in their 80's and beyond.
One must be at least 62 years old and live in the home as a primary residence. Any underlying debt associated with the property must be paid off with the the reverse mortgage. Additionally, a Financial Assessment is conducted by reviewing current income and credit history in order to ensure continued timely payments of property taxes and homeowners insurance. In most cases, those with with limited income or deliquent property charges can still qualify with a set aside of reverse mortgage proceeds that allows the servicer to help pay those items on the borrowers' behalf.
Reverse mortgage loan amounts, called "Principal Limits", range from 45-65% of a home's value (up to a maximum value of $765,600 for the FHA Home Equity Conversion Mortgage (HECM) program). The older one is, the more equity can be accessed. A good rule of thumb is that borrowers must have around 50% equity, more or less, depending on age.
Absolutely. There is absolutely no prepayment penalty with a reverse mortgage. To find out the current payoff amount, one would contact the company servicing their reverse mortgage to inquire. Payoffs can be made from one's current assets, gift funds, replacement mortgages or lines of credit, or by proceeds from the sale of the home.
One of the most common myths about reverse mortgages is that the lender is only going to allow one to borrow a certain percentage of the property value and then take my property when they leave the property permanently. THAT IS SIMPLY UNTRUE. One only owes back what funds they have taken from the reverse mortgage, plus the accrued interest and mortgage insurance. Anything above that in terms of equity belongs to the borrower. In a death situation, the property goes into one's estate and inheritance is determined by one's Will or state laws should they die without a will. A family has up to six months to pay off the reverse mortgage. That can be extended to up to a year, when the family is making strides to repay the loan. In most cases, the estate hires a realtor to sell the property. The loan then gets paid off with the proceeds of the sale and the excess goes to the heirs. It is perfectly acceptable to keep the property in the family, that is perfectly acceptable. The family just has to pay off the reverse mortgage, often obtaining a new mortgage of their own. Should the balance of the reverse mortgage exceed the value of the property at the time of death, then the family will normally sign over the property to the lender and not be responsible for any amount above the value of the property.
"We selected Michael J. Myers as our agent primarily based on his knowledge and genuine interest in helping us through the procedure. Michael was always there to guide us and answer questions. He represented us with the various agencies-banks, appraisers, HUD, etc.--and was instrumental in resolving any issue that arose (which were few!). We would highly recommend Michael J. Myers!"
"Michael was very informative and solicitous as he shepherded us through the various steps of our procuring the mortgage. Whether at his office, on the phone, or at our house he was always available to answer our questions and complete the necessary steps to finish the documents. I can think of no better person than Michael J. Myers to handle our transaction."
"Thank you, Michael, for your help in getting my mom's reverse mortgage. Your expertise and help every step along the way made all the difference in getting it done. The reverse mortgage has enabled my mom to stay at home and still be able to afford some caregiving that her health situation requires. Many thanks to you!"
"Knowing what I know now, I can't imagine obtaining a reverse mortgage without the help of Michael Myers."
"When we sold the home we had lived in for 25 years and began looking for our "dream condo with a view", we found we were somewhat limited based on the proceeds from our sale. Working with Michael enabled us to purchase that dream condo and still put some money into the bank for future needs. It was the perfect program and Michael was the perfect consultant for us. Thanks, Michael!"
"I just wanted to take the time to let you know what a god experience I had working with Michael. There were several obstacles that came up while trying to get a reverse mortgage. Michael worked diligently perusing many different avenues to make this happen for me. He even attended a homeowners meeting and was able to get them to change some verbiage in the contract which was one of the several issues that came up. I do not believe I would have gotten the loan without his perseverance. Additionally, he always maintained a good attitude. Michael is very very good at his job!"
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Charges such as an origination fee, mortgage insurance premiums, closing costs and/or servicing fees may be assessed and will be added to the loan balance. As long as you comply with the terms of the loan, you retain title until you sell or transfer the property, and, therefore, you are responsible for paying property taxes, insurance and maintenance. Failing to pay these amounts may cause the loan to become immediately due and/or subject the property to a tax lien, other encumbrance or foreclosure. The loan balance grows over time, and interest is added to that balance. Interest on a reverse mortgage is not deductible from your income tax until you repay all or part of the interest on the loan. Although the loan is non-recourse, at the maturity of the loan, the lender will have a claim against your property and you or your heirs may need to sell the property in order to repay the loan, or use other assets to repay the loan in order to retain the property.
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