Reverse Mortgages: The Facts
||Did you know that you can use a California Reverse Mortgage to buy a home and not have to make any payments on the new home loan?
Or, did you know that a Reverse Mortgage HECM Line Of Credit, has a growth rate attached to it where the amount of tax free spendable money available can double or even triple over time?
The reverse mortgage isn't just about pulling out equity for living expenses anymore. However the Reverse Mortgage isn't for everyone.
We are not a high pressure sales oriented company, we are here to educate the public on the Reverse Mortgage, new protections for seniors are now in place making Reverse Mortgage safer than before.
Feel free to call me, Kevin Walton at 800-506-0652 with reverse mortgage questions or concerns.
A California Reverse Mortgage is not for everyone.
There are several types of California Reverse Mortgages and how they can be used.
Due to the recent new laws that have been passed in 2014 and 2015 to protect seniors, not all borrowers will qualify for a Reverse Mortgage.
Click here for our Reverse Mortgage refinance calculator!
The new laws are a big step in the right direction to protect our senior citizens but a large portion of the general public does not know about these changes and the media is slow to communicate these changes.
So What's New With California Reverse Mortgages?
For starters, spouses under the age of 62, can now stay in the property if the older spouse passes away.
This new law covers Reverse Mortgages taken out after August of 2014, for Reverse Mortgages taken out prior, the old rules still apply.
Another new piece of legislation doesn't allow the borrower to exhaust 100% of their equity in the first year.
This law pertains to equity lines of credit only.
Lastly, the borrower now has to show that they have ability to pay the property taxes and homeowners insurance premiums with their own funds.
In order to demonstrate this, the loan originator must collect income documentation to show the lender they have the income to pay these items.
But what happens if they don't have the income to pay these items, is the loan denied? No.
The lender will set aside a portion of the equity to ensure these items are paid, or partially paid for a specified duration of time.
These new laws protect seniors who are looking to get a new Reverse Mortgage.
Again existing Reverse Mortgage loans are not held to these new standards.
The 25 frequently Most Asked Questions On A California Reverse Mortgage are available by clicking here.
Common Uses For The Reverse Mortgage:
- To eliminate the first mortgage payment - no monthly mortgage payments are required on reverse mortgages.
- To delay social security benefits- If a senior citizen takes social security early benefits at age 62, they could be leaving tens or thousand of dollars on the table. Taking reverse mortgage funds as monthly income till age 70 or older in lieu of taking SSI, gives seniors alternatives.
- To buy a home. Many seniors don't know that when selling their existing principal residence and buying a new one, they don't have to pay all cash. With a sizeable down payment, say 50%, they could buy a new home, keep the other 50% in the bank, and not have to make any mortgage payments on the new home loan. For more information watch a quick video on this concept by clicking here or click here for a quick read and downloadable slide show you can share with your friends.
- Taking a line of credit that grows over time. HECM lines of credit have a little know growth factor attached to them. If a senior takes out a HECM line of credit at age 62 for $50,000 and doesn't touch it (takes no advances), the line of credit can double or even triple in size in time. It's all usable tax free money for the future. Watch a quick video on this concept by clicking here.
- To make improvements on their home without to make monthly payments.
- To pay for on going medical care without having to make monthly payments.
- To be able to do things a senior should be able to do! Having funds available to visit children and grandchildren, travel and enjoy golden years is priceless!
These are just a few reasons on how a reverse mortgage has been used, but there are many more.
The reverse mortgage is increasingly being used for financial planning for current and future usage.
Some seniors feel that they should leave their equity to their children and grandchildren to enjoy, and that is their right to feel that way as well but my personal feeling is having a better quality of life now is more important than passing funds on to heirs.
Who Pays Back The Balance Of The Reverse Mortgage Loan?
No monthly mortgage payments are required on any type of Reverse Mortgage.
The loan is not free! Each month you choose not to make a mortgage payment, the balance of your loan goes up.
When all borrowers pass away, or have moved out of the home (no longer being their principal residence of at least 7 months out of the year), the property is sold, or refinanced by heirs, and the balance is paid off.
What if the balance is higher than the property value when it goes to sell?
There is gap insurance (FHA mortgage insurance) that will pay any difference, so the heirs don't have to worry about owing any money to the bank.
If heirs choose to refinance the home, the full amount of the mortgage balance must be paid with the new loan.
Types Of Reverse Mortgages
Over the years reverse mortgages have evolved and as of 2015 several types of loans are available.
The lump sum: The borrower gets all their funds upfront.
The HECM line of credit: Similar to a home equity line of credit. The senior can borrow as they see fit from the line.
HECM purchase loan: This loan is used to buy a home.