The Who, What & When of Reverse Mortgages
There are more myths with Reverse Mortgages than any other loan program. Some used to be true, and some are downright false. We’re here to try and help debunk some of those myths, as well as explain exactly what a Reverse Mortgage is, who qualifies, and what your options are.
First off, what does the term “Reverse Mortgage” mean? A reverse mortgage in its simplest form is the equity in your home being used as your savings account, making your payments for you. Instead of paying down the Principal amount as with a traditional or “Forward Mortgage”, you are using the equity in your property to add to your principal amount. For this reason, you must have a minimum of 50% equity in your property to be eligible. The other main qualifier is at least one of the borrowers on the transaction must be 62 years of age or older. There are many different circumstances to qualifying so please reach out to one of our local Mann Mortgage Reverse Mortgage Specialists for all the details.
One of the most common myths is, “if I’m under water when I pass, or move to assisted living, my heirs are responsible for the past due debt”. Only part of this statement is true. Your heir(s) are responsible for your home after you move on. They will have one year to either purchase the house from your estate or sell the home. In the unlikely event you are underwater on your home, there is no recourse for your heirs. The bank will simply take over the home, and the heirs do not need to pay the difference. This is part of the new and improved Reverse Mortgage. In the other scenario, if you move on, and there is still equity in the home, your heirs can:
1). Purchase the current note as a primary, second or investment property, or;
2). List the house for sale, and gather the equity from the sale
Another scary aspect to most Reverse Mortgage inquirers is that they can lose their home while they still live in it. This is only partially true. The only way you can be removed from your home is if you let your property taxes or insurance lapse, or the county deems you are not keeping up your property. The main thing to note on that point, is the exact same thing will happen to you if you have a Traditional Forward Mortgage. So, that aspect should not be attached to Reverse Mortgages, but all mortgages. A perk of the Reverse Mortgage program however, is if you have enough equity in your home, you can add your taxes and insurance into your Reverse Mortgage, and never have to worry about paying them!
Our specialists here at Mann Mortgage – Central Oregon always sit down with our clients and fully explain every option. Each scenario is different and Reverse Mortgages are in no way “one size fits all”. That is why sitting down locally with someone you know, and trust is so important. We will never push a certain loan program on you. We will work with you to find the best and most viable option for you and your entire family.
Most people ask themselves, “how can I add to my loan balance monthly, and never end up going under water?” Very good question, and here’s the answer. The historical appreciation of homes in the United States is near 4%. In central Oregon that average is closer to 4.89%. If your current home is worth $250,000, using 4.89% appreciation, your home in 15 years will be worth just over $500,000. So, if your loan balance is accruing at 4.75% a year over the next 15 years with your Reverse Mortgage, you will have the same if not more equity in 15 years, as you do now. Sitting down with a specialist will allow you to see the actual charts attached to your specific situation, as your age, equity, and program all effect your mortgage.
I’ll leave you with this thought, imagine if you could eliminate your mortgage payment, allowing you to retire, and spend more time with your family and friends. The burden a mortgage payment can have on seniors, many times forces them into assisted living homes much too early. A reverse mortgage could allow you to hold on to your family home, and possibly, from the extra cash flow, hire an in-home care provider.
Over the following weeks we will break down the different loan options, and what perks each provide. The holiday season is a perfect time to talk with your loved ones about exploring their mortgage options moving forward. Please reach out to one of our two Reverse Mortgage Specialists and schedule a time to find out your options.
Jake Van Cleave – Loan Advisor
Reverse Mortgage Specialists
Chester Freeman – Reverse Mortgage Specialist / Branch Manager
Direct Line: 541-377-0711
Ben Wagenblast – Reverse Mortgage Specialist / Sales Manager
Direct Line: 541-908-5757