Reverse Mortgages

7/30/2019 – Reverse MortgageI hope you are having a great week and I hope that life is treating you well.  The heat has slowed the market ever so slightly, but we are still booming due to low interest rates.
We are still seeing quite a few Reverse Mortgages being done and to me they are a great retirement vehicle when you didn’t quite save enough money while you were raising your family.  Whatever the case is, Reverse Mortgages are a tremendous tool for people over the age of 62 that have some equity in their home.  So knowing some facts about reverse mortgages is very important and being able to explain this to a client can be very beneficial. Below are a few things that you need to know about reverse mortgages:

  • There is no income qualification for a reverse mortgage, but we are required to make sure a buyer can continue to pay their other obligations such as property taxes and insurance. This makes it easy for people with lower income or income in transition to finance a property.
  • One owner must be at least 62 years old to get a reverse mortgage.
  • You will not have a payment on a reverse mortgage.
  • A reverse mortgages is generally an FHA loan, so if you are trying to get a reverse mortgage on a condo then it is beneficial if the condo is FHA approved.
  • What is a maturity event? A maturity event is any event which may cause your reverse mortgage to be called due and payable. Once a loan has reached a maturity event, then no additional funds may be advanced from the reverse mortgage. Such maturity events include:
    • All borrowers have passed away
    • All borrowers have sold or conveyed title of the property to a third party
    • The property is no longer the principal residence of at least one borrower for reasons other than death
    • The borrower does not maintain the property as principal residence for a period exceeding 12 months because of physical or mental illness
    • Borrower fails to pay property taxes and/or insurance and all attempts to rectify the situation have been exhausted
    • The property is in disrepair and the borrower has refused or is unable to repair the property.
  • Can I pay off my reverse mortgage before a maturity event is reached?
    • Yes. You can pay your reverse mortgage in full at any time during the term of your reverse mortgage.
  • How long will my estate have to pay off the reverse mortgage once it has been called due and payable?
    • The reverse mortgage is to be paid in full once it has been called due and payable. You and/or your estate must work closely with your loan servicer to ensure your reverse mortgage is paid in full in a timely manner. If arrangements to pay the reverse mortgage are not made with your loan servicer, then your loan servicer may proceed with foreclosure between 30 days and six months from when your loan has been called due and payable. If you or your estate are actively working to either refinance your property or sell your property so as to satisfy your reverse mortgage, then foreclosure maybe forestalled. It is not typical to forestall foreclosure after one year has passed since the maturity event. It is strongly advised that you and your estate work closely with your loan servicer once your loan has been called due and payable.

I hear from people all of the time that you should never do a reverse mortgage and I guess in a perfect world that is correct, but in a perfect world we would have enough income to support our lifestyle in retirement.  Unfortunately, most people don’t retire with enough income to support themselves through their retirement. The reverse mortgage is a tool to allow a homeowner to live in their property without having to worry about payments. FHA Is banking on the fact that the property will increase in value over time and that is why they allow the balance to go higher every month.

In simple terms if a senior owes $100,000.00 on a property that is worth $500,000.00 and they convert that loan to a reverse mortgage. The loan balance will be approximately $250,000.00 in 15 years. The value of the house if properties go up by just 3% per year will be approximately $783,000.00. So there is an increase in equity over the 15 years and still no payments were made by the homeowner.

We also do Reverse Mortgages above the FHA Limits for people that live in expensive areas and are looking for a little more.  We do Reverse Mortgages in 48 of the 50 states if you are thinking of retiring out of state!

Interest rates are starting to stabilize and they have been creeping up a bit over the past couple of weeks. Below are rates as of today:

  • 30-year fixed conventional 1st Mortgage with 25% down – 3.875% (3.930 APR). Loan amounts up to $484,350.00 = $2277.59
  • 15-year fixed conventional 1st Mortgage with 25% – 3.250% (3.350 APR). Loan amounts up to $484,350.00 = $3403.38
  • 5/1 ARM 1st Mortgage –  25% down – Fixed for 5 years and then becomes variable – 3.250% – (3.2605 APR) Loan amounts up to $3,000,000.00 = $13,056.19
  • 7/1 ARM 1st Mortgage – 25% Fixed for 7 years and then becomes variable – 3.375% – (3.385 APR) Loan amounts up to $3,000,000.00 = $13,262.89
  • 10/1 ARM 1st Mortgage – 25% Fixed for 10 years and then becomes variable – 3.500% – (3.510 APR) Loan amounts up to $3,000.,000.00 = $13,471.34
  • 30-year fixed 1st Mortgage FHA loan 3.50% down – 3.500% (4.914 APR). Loan amounts up to $484,350.00 = $2213.01 + $349.08 PMI = $2562.09
  • 30-year fixed 1st Mortgage VA loan 0% – 3.500% (3.681 APR). Loan amounts up to $484,350.00 = $2174.95
  • 30 Year Fixed rate 1st Mortgage Jumbo Loan 25% down – 4.125% (4.145 APR).  loan amounts up to $3,000,000.00 =14,539.49

I will be in the office all week and I would love to help you or anyone you know get a good loan with great communication.  My cell number is 661-714-6258 and my office number is 661-260-2970.  Have a great week and stay cool!