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Michael Myers

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Pay for home improvements without having monthly mortgage payments.


Reverse Mortgage Lender

Michael Myers

Reverse Mortgage Consultant | NMLS #488763 | 206-312-9800

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What is a reverse mortgage and why should you consider one?

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.

How does a reverse mortgage work?

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.

What specifically is a reverse mortgage loan?

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.

Should the urgent need arise, how would someone get out of a reverse mortgage?

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.

On average, how much money does someone get from a reverse mortgage?

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.

Who can qualify for a reverse mortgage?

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.

How much equity do I need to get a reverse mortgage?

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.

Can I pay off my reverse mortgage early? If so, how do I do that?

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.

What happens to my reverse mortgage when I die?

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.

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Michael Myers also serves the locations of Seattle, Bellevue, Kirkland, Washington.

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