I still have a mortgage on my home - do I qualify for a reverse mortgage?
A reverse mortgage can be used to payoff an existing mortgage and in my experience the majority of folks that I work with do have an existing mortgage (or two) to payoff. The kicker is, will the reverse mortgage provide enough funds to payoff the existing liens?
Providing you qualify for a reverse in terms of age, occupancy and property, yes. As long as the reverse will loan enough funds to payoff the existing mortgage(s) then you are good as gold. If the reverse does not provide enough, you have the option to kick in additional monies of your own along with the reverse to payoff the mortgage.
FHA- HECM Reverse mortgages use the FHA HECM PLF tables to calculate the loan to value. Basically the older you are the more you can borrow - and the lower the interest rates are, the more you can borrow.
Here is an real world example of how it could work:
Scenario - Married couple both are 66 years of age, living in a $450,000 home in Anaheim and they currently have a $175,000 balance on their mortgage. They had refinanced at the end for 2004 at 6% lowering their house payment at that time to $1,199.00 per month.
Solution #1 - HECM Saver ARM - The HECM Saver is a smaller, less expensive FHA Reverse Mortgage that would provide funds to payoff their existing mortgage, establish a growing line of credit in the amount of $58,000. The costs would run approximately $8,100 and are financed into the loan. These costs are calculated with an upfront FHA/MIP of $45 and a negotiable origination fee of up to $6,000) ) Hot Tip! Shop around to get the best origination fee!
Solution #2 - HECM Standard ARM - The HECM Standard ARM is the granddaddy of FHA Reverse Mortgage. Although it has been through changes over the years the structure hasn’t changed much.
The HECM Standard ARM would payoff their existing $175,000 mortgage, establish a growing line of credit of over $98,000. The costs (including upfront FHA/MIP of $9,000) would run approximately $15,000
This client chose the HECM Saver as it provided them with plenty to payoff their existing mortgage and the rest of the available reverse loan was left in a line of credit - for emergencies. They were able to improve their cash flow by $1,199.00 per month by eliminating that mortgage payment AND they established a growing line of credit that gives them financial peace of mind to handle emergency needs.
As always, I love to hear what you think - so please post your thoughts and comments.
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
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iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain 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 or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.