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All about “Reverse Mortgages”–When to use, HOW to use, WHY they are a good tool for those in their later years

Here in Sonoma County the largest demographic are folks over 55. With an “aging” population the frequency of useage for “Reverse Mortgages” is on the rise. We’ve brought in expert Jill Gromm to give us a mini seminar on the various types of Reverse Mortgages available and WHICH one might be RIGHT for you!

Reverse Mortgage specialist

Reverse Mortgage for Purchase

 Why Use a Reverse Mortgage for Purchase

  • Empty nesters downsizing in retirement

Two-story to a single level  or Home or land too much to maintain

  • Relocation

Closer to family or friend

Closer to hospital and medical treatment

  • Unable to purchase/move in the past due to credit/income qualifications

Traditional loan still has a mortgage payment whereas with a reverse mortgage there is no monthly mortgage payment.

Easier to qualify for a reverse mortgage – (Bill S. 469 – HECM Stabilization Act of 2013 – will have a financial assessment qualification for the loan but we don’t know what that is going to look like)

Qualifying for a Reverse Mortgage

  • All People on title must be 62 or better
  • Amount of down payment is determined by the clients age
  • Property – Must meet FHA guidelines
  • Right Now everyone is a preferred borrower.  Credit and Income does not affect the interest rate.  In the Senate there is a proposed bill (Bill S. 469 – HECM Stabilization Act of 2013 – will have a financial assessment qualification for the loan but we don’t know what that is going to look like yet)  The goal is to make sure the client can make the property taxes and insurance payments.

 Traditional Reverse Mortgage (Ways to receive your money)

  • Tenure: equal monthly payments
  • Term: equal monthly payments for a fixed period of months as decided by the borrower
  • Line of Credit: payments made in installments or at various times and in amounts dictated by the borrower(s).  Line of credit grows monthly through the years
  • Modified Tenure: monthly payments with a line of credit
  • Modified Term: monthly payments for a fixed period of months with a line of credit
  • As long as you have money available you can change your mind at anytime

Purchase Scenario (70 year old person) 

Reverse Vs Traditional Loan (Which one is better for you…)

 Purchase price $398,000

Down Payment $149,866

Reverse Mortgage Loan Amount $248,133

No Monthly Mortgage Payments

 

Purchase price $398,000

Down Payment $149,866

Traditional Mortgage Loan Amount $248,133

30 Year fixed loan at 4.25% interest rate the payment would be: $1,220.      

 

Maybe you can make that payment now, but can you in 10 or 20 years.  With a 30 year fixed you have 30 years of payments.  With a reverse mortgage there are no mortgage payments.

 Benefits of Reverse Mortgages

  • Currently no credit or income qualifications
  • You can pay off your existing mortgage
  • You or your heirs will keep all remaining equity (amortization schedule provided upfront so you can see before getting the loan – no guess work)
  • Non-recourse loan
  • It won’t affect Social Security or Medicare Benefits
  • No Restrictions on how you spend your money
  • No monthly payments … ever; the loan balance grows with time
  • No upfront fees collected
  • Most loans are government insured
  • You can receive tax free Income
  • No Prepayment Penalties ever
  • Fees Regulated and Capped

 Safeguards to this Loan:

  • HUD Counseling required (Makes sure I did my job in explaining the reverse mortgage           

  • Non-recourse

  • FHA HUD backs the loan which means with a credit Line or monthly payments you will always access to

    Jill Gromm

    California Reverse Mortgage Consultants

    3033 Cleveland Avenue, Suite 150

    Santa Rosa, CA  95403

    jgromm@CRMcares.com

    (707) 535-2926  Office Number

    (800) 311-9085  Toll Free

    CA DRE # 01326979

    NMLS 246723


 

 

 

 

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