A myth is that you have to have your home paid off to do a reverse. Not true. A typical borrower is in their mid-70s, owes $100k-$200K on a mortgage now, and is getting by, but can't do any extras in life. They take the reverse to get rid of the mortgage payment, and have funds available from their equity for life's extras and surprises. I hear from many that they outlived their retirement accounts, or can't work anymore, and just need the current mortgage payment gone to afford to stay in their home. Minimum qualifying age in Oregon is 55, and Washington is 60.
A reverse mortgage purchase allows a qualified buyer purchase a home with approximately 45-75% down (depends on program and age), and have no house payments. Like any other home, they still need to pay property taxes, home/hazard insurance, any home association dues (HOA), and maintain the property. Many times a senior buyer can; 1) sell a home with a mortgage they are making payments on, and 2) buy a home using a new reverse mortgage, only using their equity from the current home for funds to close, and 3) end up in the new home with no mortgage payments.
Most reverse mortgages are done as a refinance. The senior already owns the house, and they just want to find a way to stay in it long term. Not having a house payment helps with that goal. While you can make payments on the reverse, most don't, and the interest accrues to the balance over time. Most reverse mortgages are closed with a HELOC so the senior can access funds as needed. A reverse HELOC has much better terms than a HELOC at the local retail bank or credit union, and you don't have to pay payments.
There are many reasons clients take a reverse mortgage. Many times, there are 2 or 3 reasons that make reverses the right decision.
You own your home still - You are not transferring title to a lender. You can sell and pay off the reverse at any time you want - It is your house. A reverse mortgage is just a mortgage, but one you don't have to make payments on. Reverses have many similar requirements to regular mortgages, such as you still need to pay property taxes, home insurance, homeowners association dues, maintain the home, etc. If you have qualified equity in your home (many say to us they are House rich - Cash poor), want to stay in your home, a reverse mortgage may be right for you. Give us a call to discuss options and get a pre-counseling package with all the numbers for your situation. No stress, nor obligation to proceed.
HELOC Challenge - Traditional VS Reverse
Purchase your Home with a Reverse - No Monthly Mortgage Payments Required
HELOC Reverse Mortgage - Some Benefits
Portfolio Reverse Mortgage - More Options
Reverse mortgages are available with different terms and options. Fixed, ARM, HELOC, Margin, Cash at close, Monthly Pay Out, and more. You need the help of an expert to compare the options so you can make the right choice on what is best for you. Do you want to do this with a celebrity on TV's call center, a direct mailer out of state 800 number, or a local loan officer you can see in person?
The amount of mortgage available as compared to your value, is determined by your age, and any others age on title and/or mortgage if applicable. The older you are, the more you can get as a percentage of value. Simply based on life expectancy. Numbers are based on the youngest person as requirements define it.
There are two main paths we follow on closing reverse mortgages. FHA HECM and Portfolio. You can purchase a home, or refinance, with either. Once you understand the differences, the choice will be obvious which is the best path for you.
"Home Equity Conversion Mortgage" (HECM) is insured by FHA. HECM is available as a HELOC or Fixed Rate mortgage. Most like the HELOC option as you don't pay interest until you draw the money out. You can get cash at close, monthly pay outs, a HELOC, or many times combine options. HECM have lower rates than Portfolio, but have higher costs. One borrower has to be 62 years old to qualify for a HECM.
Portfolio reverses can be closed in a much wider variety than HECM. You can be younger, one borrower needs to be at least 55 in Oregon or 60 in Washington. You can get much larger loan amounts which is helpful to those that own high value homes. Condos are easier to get approved as condos don't have to be FHA approved like with a HECM. Closing costs are much lower than with a HECM, though the rates are higher and Portfolio give you a lower percentage of value than a HECM.
If you've been wondering about a reverse mortgage, and if it could help you stay in your home, please call us for more information and numbers for your situation. We can help.
(A) At the conclusion of the term of the reverse mortgage loan contract, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to the person and the person may need to sell or transfer the property to repay the proceeds of the reverse mortgage from the proceeds of the sale or transfer or the person must otherwise repay the reverse mortgage with interest from the person’s other assets. (B) The lender will charge an origination fee, a mortgage insurance premium, closing costs or servicing fees for the reverse mortgage, all or any of which the lender will add to the balance of the reverse mortgage loan. (C) The balance of the reverse mortgage loan grows over time and the lender charges interest on the outstanding loan balance. (D) The person retains title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts may cause the reverse mortgage loan to become due immediately and may subject the property to a tax lien or other encumbrance or to possible foreclosure. (E) Interest on a reverse mortgage is not deductible from the person’s income tax return until the person repays all or part of the reverse mortgage loan.
You can not have a reverse mortgage, and at the same time have your property in Oregon's homestead Senior Property Tax Deferral program. If you are in the Senior Property Tax Deferral program now, and owe back property taxes to it, we will have to pay off the balance with the new reverse mortgage closing.
This website has not been reviewed, approved, or issued by HUD, FHA, or any government agency. Pacific Sunset Mortgage, LLC is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.
Portfolio Reverse Mortgage is a portfolio loan program, and it is not affiliated with the Home Equity Conversion Mortgage (HECM) loan program, which is insured by FHA. Portfolio is available to qualified borrowers who also may be eligible for HUD, FHA’s HECM program or are seeking loan proceeds that are higher than HUD, FHA’s HECM program limit. Upon a maturity event, any non-borrowing individuals with an ownership interest in the property, including non-borrowing spouses, will have a short period of time (for example, 30 days from a due and payable letter or an alternate time specified by the loan servicer if extensions are available under the circumstances) to purchase the property from the estate or, if the non-borrower inherits the property, pay the loan in full using any sources of funds available to them. Any non-borrowing individual, including a non-borrowing spouse, should have a plan to pay off an Portfolio reverse mortgage upon the borrower’s death or any other maturity event. If the non-borrower is unwilling or unable to purchase the property or pay the loan in full, there is no protection for the non-borrower (including a non-borrower spouse) to maintain an interest in the home or to continue residing in the home past the maturity event and the non-borrower may be evicted upon foreclosure. The FHA HECM program has protections in place for certain non-borrowing parties, so a reverse mortgage applicant with certain non-borrowing parties should strongly consider a FHA-insured HECM loan. Under the Portfolio reverse mortgage loan program, a maturity event occurs when the last surviving borrower no longer lives in the home as his or her primary residence for at least 12 months, the property charges (including taxes, insurance, HOA dues or any other property charges) are not paid, required repairs are not completed or the property is not maintained, or any other maturity event, as specified in the Security Instrument, occurs.
Reverse Mortgage loans change requirements frequently. Requirements change without notice. Please call us to discuss your situation and goals.
Link: CFPB HELOC Booklet - What you should know about home equity lines of credit
Link: National Council on Aging - Use Your Home to Stay at Home
Link: Federal Trade Commission - Reverse Mortgages
Link: IRS - Are proceeds I receive from a reverse mortgage taxable to me?
Link: CFPB - Don't be misled by reverse mortgage advertising
Pacific Sunset Mortgage, LLC. NMLS #1086349 ML-5769. Steve Emory Sr Loan Officer NMLS #45523. I am authorized to conduct business in Oregon and Washington States. 15455 NW Greenbrier Pkwy Suite 100, Beaverton, OR 97006. Certain restrictions apply. This is not a commitment to lend. Applicants must qualify and Not all applicants will qualify. Equal Housing Lender. All opinions expressed by Steve Emory, on this website, on his Facebook pages, are Steve's opinions and do not reflect the opinions of Pacific Sunset Mortgage, LLC. You should not treat any opinion expressed by Steve as a specific inducement to take a particular mortgage or follow a particular strategy, but only as an expression of his opinion. You must make an independent decision regarding mortgages or strategies mentioned on his website. Before acting on information on this website, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial counselor. http://www.nmlsconsumeraccess.org/entitydetails.aspx/COMPANY/1806349