Reverse Mortgage Information

Why Would Seller Choose an Offer With Reverse For Purchase Financing?

Fri, 31 May 2013 12:58:13 -0700

It's a Question that is asked by Realtors®, Sellers and Buyers alike. Why would a seller choose an offer from a buyer financing their home purchase with an "FHA-HECM For Purchase" loan?

Here are some compelling reasons that many sellers would and in fact do prefer this offer.

1. Owner occupied financing - In the current crazy market there is a growing sentiment among sellers to accept offers from buyers who are NOT investors as they want to see new families building memories and loving the home as much as they did. Homeowners can be pretty sentimental even about a house they are selling.

2. A Reverse For Purchase requires a substantial down payment. We're talking 30% to 50% down - that gives sellers a sense of confidence in the "close-ability" of the transaction.

3. Lower seller closing costs! This is a great reason to accept a Reverse For Purchase offer: According to guidelines the seller is NOT allowed to pay ANY of the buyers closing costs, none, zip, nada. On top of that, the BUYER must pay for their own Owners Policy of Title Insurance as well as the Lenders' ALTA Policy of Title. That saves the seller the highest closing cost, other than commission that they usually incur. The Owners Policy on a sale of $500,000 here in California can run $1,400.00 or more.

4. Easy buyer qualifying - Buying with a Reverse For Purchase is relatively easy as far as qualifying. Since there are not monthly mortgage payments on a HECM Loan, there is only very limited income qualifying - though that is likely to change soon. Buyers must be over 62 years of age, plan to occupy the property as their principal residence and the property needs to be FHA compliant.

It's really all about the listing agent being informed and educated about this fantastic financing opportunity for senior home buyers. It's also a great marketing tool for agents to help older homeowners make the decision to sell and downsize.

Would love to hear what YOU think!

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Values Are Up~Riverside Couple Now Qualifies for Reverse Mortgage

Thu, 02 May 2013 12:27:38 -0700

Riverside Zillow Home Value Index

Riverside real estate info

I got a phone call yesterday from John C. who wondered if home values had risen enough for him to now qualify for a reverse mortgage (was short to close when he first inquired in 2010). The answer is MAYBE! And recently the answer was yes for a couple right here in Riverside.

Two years ago, I met with a couple in Riverside who were looking to get a reverse mortgage in order to payoff their current mortgage. Unfortunately, based on their home value and age, a reverse mortgage wasn't able to provide enough funds to work for them.But now it's a different story - With home values rising here in Riverside about 20% since last year and low inventory fueling a current price uptick of 6.8% in just the past quarter - this couple is now able to access enough money to not only payoff their mortgage with a reverse mortgage, but will be able to set up a growing line of credit for future emergencies.

In 2011, when I first met them their home was worth about $250,000 and their mortgage balance was $180,000. At 71 years old (youngest borrower) a reverse mortgage was $20,000 short from paying off their mortgage.

Now, 2 years later, the home is worth about $295,000 and they are two years older (73) the mortgage balance to payoff is less, about $174,000. A reverse mortgage now will payoff their current mortgage AND set up a line of credit of $21,000 that will grow over time.

Goodbye $1,046 mortgage payment for the next 23 years! Hello peace of mind knowing that they can stay in their home. They are even planning to make some payments on the reverse mortgage which will not only help to keep the balance down (preserving equity), it will increase the line of credit.

I just love a happy ending! Next, I will be researching John's home value and running some numbers for him.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Yucaipa Reverse Mortgage For Purchase Story

Mon, 22 Apr 2013 18:10:12 -0700

I do love my job! I have been brainstorming with this one couple in Yucaipa for over 2 years. They knew a reverse mortgage would be a part of their retirement strategy, just not sure when or how. They looked into two options.

Refinancing their current home with a reverse mortgage to payoff the existing loan and staying.

or...

Selling the existing home and buying a smaller more suitable home with a Reverse For Purchase.

As time progressed it became clear that downsizing and buying with a reverse mortgage was the better strategy for them. Taking care of their big home on a large parcel would have become a burden both physically and financially. They realized that having a smaller home in a gated community would be a safer, easier and better choice as they age. With home values in Southern California on the rise, they figured it was a great time to make the jump. So, they listed their home with a great local Realtor and it sold quickly. After accepting their buyers offer, they began looking at homes and finally found the perfect place. Single story, smaller, but not too small, in the gated Active Adult Community of Solera in Beaumont, CA.

By using the reverse to help them pay for their new home they did not have to use all of their sale proceeds, and had a nice chunk left over to beef up their Retirement Accounts. The reverse mortgage loaned approximately 60% of the homes appraised value and they put in the rest plus closing costs.

SWEET! What do you think?

Note: A HUD insured Reverse Mortgage requires no monthly mortgage payments. The homeowners are responsible for maintainging the home, paying property taxes, homeowners insurance and HOA Dues (if any). Pretty much like any homeowner does, with or without a mortgage.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Lakewood Reverse Mortgage "?" When does a reverse mortgage make sense?

Thu, 23 Aug 2012 16:08:23 -0700

Like any financial product or loan, a reverse mortgage isn’t for everyone, but when it’s used for the right reasons it can dramatically improve a homeowners financial position, lifestyle and well being.

Basically, a reverse mortgage is borrowing against one of your assets, your home. I think the danger to a homeowner comes from two basic places. 1. They don’t do their homework and get educated about the product, comparing and contrasting providers, costs and options. 2. They don’t take a clear look down the road and have plans for when they are truly elderly, possibly frail and in need of some care.

I tell my clients all the time, “Remember last year when you were 40?” They laugh an say, “It sure seems like last year!” (Because now they are 65 or 70) “Well...Do some thinking now, so that next year, when you are 85 or 90 you are not suffering because a younger you blew it.”

Believe it or not, it’s not so much the reverse mortgage that will cause them trouble but how they access the funds a reverse mortgage turns loose. The attractive phrase “Fixed Rate” will often shut down a sensible person’s open mind to the benefits of the “Adjustable Rate”. So do your homework, think about where you will be when you are 70, 80, 90 and 100. Do you want to be able to continue to tap your home’s equity to supplement for emergencies? Or do you just want to get everything you can now and the future be damned?

A reverse mortgage makes sense when a senior can understand it and they truly can “Use Their Home To Stay at Home”

If you or a loved one has questions about Reverse Mortgage, please don’t hesitate to contact me by phone or email. Your comments and questions are welcome below too!

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Southern California Reverse Mortgages~Financial Aid for 62+ Homeowners

Tue, 28 Jun 2011 01:50:14 -0700

Even today with all the commercials on television about reverse mortgages featuring famous actors, politicians and entertainers, I am amazed that there are older Americans here in Southern California who do not know about reverse mortgages!

I received a client referral Friday from a notary who met with a couple to notarize loan modification documents with a large bank. (Note- my opinion - the bank modification department should be required to tell homeowners over 62 about the possibility of obtaining a reverse mortgage) The elder homeowners were going to get monthly payments reduced by less than $200, and confided to the notary that they were extremely stressed about even being able to make the new lower mortgage payment. The notary recognized that they were both quite elderly and likely to qualify for a reverse mortgage as they only owed $150,000 on a home in Los Angeles. The notary explained a little bit about Reverse Mortgages to them and asked them if he could have me give them a call to see if I could help. They agreed and I contacted them.

In their late eighties (extremely active, alert & healthy) they qualify for a reverse mortgage that will enable them to eliminate their monthly payment, remain in their home and have sufficient funds for taxes, maintenance, insurance, and a decent sized line of credit for emergencies.

When I contacted the couple’s daughter to review the loan program with her, she began to cry with relief, seeing that her parents would no longer have to worry about making a house payment. She had been feeling so helpless as she was unable to assist them financially herself due to her own economic worries caused by this recession.

The homeowners and their children had no idea that there was such a program as reverse mortgages. Finding out that it was an FHA Insured loan program helped them to feel even more secure about it.

It is my mission to inform every American over the age of 62 about the facts of reverse mortgages. Though you may never need to use one, like CPR, life vests & spare tires ....everyone should know about them and how the work.

Spread the word.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Corona Reverse Mortgage Question - Can I qualify for a reverse mortgage?

Mon, 04 Mar 2013 19:38:48 -0800

Hi Deborah, Can I qualify for a reverse mortgage? I am single and 64 years old. My home is worth about $310,000 and I owe $107,000, with another 11 years to pay on it. I do have about $150,000 in a retirement account. I recently lost my job, which covered my house payment and I don’t want to take money out of my retirement account yet. Sincerely, Margret.

Dear Margret,
I’m so sorry to hear about your job loss. Based upon the information you’ve given me, an FHA reverse mortgage could be a solution for you. Though income and credit scores are not an issue, there are some underwriting guidelines to consider. Providing there is nothing of that nature to be concerned with and that you are living in an FHA eligible property it would be worth your time to look into the HECM reverse mortgage.

A big part of the process of getting a reverse mortgage is educating yourself on the product. How it works, what it costs, and which reverse to get. If you were to get a reverse mortgage, you’d want to get the right one for you. Sometimes, it’s not the one you initially think it should be.

Part of my job is to meet with my clients face to face to educate them about the product and its variations. Depending upon their location, I may meet with them over the phone or even Skype (more and more of my clients Skype - I love that!) During that meeting we discuss their plans for the future and for their home. We will review all of the reverse mortgage options, and go over each of the closing costs in detail. After meeting with the homeowners, they may decide to take the next step, Counseling - or continue to work on educating themselves on the product, do some competitive shopping (highly recommended).

Though you and I haven’t had a face to face meeting here are some possible scenarios that might work for you.

#1 - The HECM Saver Adjustable - If your home appraised for $310,000, this reverse mortgage loan would payoff your $107,000 mortgage AND provide you (after costs) with a growing line of credit of just over $49,000. Without a mortgage payment you will have effectively increased your income, and you have an additional $49,000 available for emergencies. The HECM Saver is a lower cost reverse mortgage with a smaller loan to value.

#2 - The HECM Standard Adjustable, another option would provide (after costs) a growing line of credit of $74,000 and payoff your existing mortgage. The HECM Standard is a higher cost, larger loan amount reverse mortgage.

Counseling: Every reverse mortgage applicant must received HECM Reverse Mortgage Counseling through a HUD approved counseling agency. They will go over your budget with you to help you to determine the suitability of a reverse mortgage for your situation. They will review the reverse mortgage product with you and help you to understand it - all without any pressure to buy.

Also, take some time to review the different posts and links in my blog here. Lots of good information to learn and ponder.

I would love to talk with you more in person to brainstorm about your different options. Looking forward to hearing from you.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Anaheim Reverse Mortgage Question

Tue, 05 Feb 2013 15:18:17 -0800

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

Reverse Mortgage Calculator

Fri, 06 Aug 2010 03:09:29 -0700

An online reverse mortgage calculator can help you to determine how much of your home's equity you can access for a reverse mortgage.

In general, at the current rates & fees you can ballpark that the funds available (after costs) will run as follows - take the youngest homeowners age, subtract 10. That figure is fairly close to the Loan(after costs) to Value senior borrowers/buyers can expect from their reverse proceeds.

You can find very basic reverse mortgage calculators on the web at sites from AARP and HUD. For a more detailed analysis please access my Reverse Mortgage Calculator.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Redlands Reverse Mortgage Story

Wed, 28 Nov 2012 16:33:51 -0800

It seems to be easy for folks to learn through stories, so I thought I'd post about a client in Redlands, California who just closed on her reverse mortgage.

A younger senior, in her late 60's, Ms. B husband passed away almost 10 years ago and it's been a struggle to make it on one income. When her husband was alive, they refinanced the home to take advantage of lower rates so she was still making those mortgage payments.

She is very frugal and creative, and has come up with a good retirement strategy for her situation. Here's what she's done:

Rents Out 2 Bedrooms - A smart woman she rents out the extra two bedrooms to other single seniors. This brings her in just over $1,000 a month. (Kind of reminds me of college roomies the way they look out for each other, yet mind their own business.)
Reverse Mortgage - Used the reverse mortgage to pay off the existing mortgage, saving her $600 a month in payments and setting up a growing line of credit (hey! you never know, one of the renters might move out - gotta be prepared)
Works Part Time - Supplementing her savings for when she's a "real" senior, and needs extra help.

Between working part-time, eliminating her mortgage payment, and renting out a couple of rooms she has boosted her net income by $2,200 per month! Pretty cool!

Things to know - yes you can rent out a room if you have a reverse mortgage, but remember the home must remain YOUR primary residence too, and you must have full use of the living quarters in the home. In other words, you can't rent out the house and just live in your bedroom.

You do not have to make payments on a reverse mortgage, the interest just accrues to the balance. The loan and all accrued interest becomes due and payable when you permanently leave the home. (Due to death, sale or illness) If a reverse mortgage causes the home to be underwater, you or your heirs are not personally responsible for the balance. The lender's ONLY recourse is to the home - this is called a "non-recourse" loan.

I hope you enjoyed this post and learned a bit more about ways to use a reverse mortgage to help you structure a safe, secure retirement. I hope you will post comments and questions.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Aging In Place and Reverse Mortgages

Wed, 10 Oct 2012 13:41:40 -0700

If you've read some of my posts before, you probably know that my parents got a reverse mortgage about 7 years ago. They were able to payoff debts and set up a line of credit for future use. Well, the future reared it's ugly head this past year and having that line of credit has come in handy.

Fisrt, my mom developed a pinched nerve in her back that is very painful. Walking upstairs to her bedroom is a dreaded chore. My dad's knees are basically shot and it is not safe for him to go down the stairs. He's good going up, and she's good going down... but that doesn't work out to well for them. Answer? They purchased a stair lift with funds from their reverse mortgage line of credit. They had it installed on the rear set of stairs. Now they can ride in safety and comfort up or down.

Secondly, they had to deal with a persistent roof leak. They have an addition on their home that expands the first floor and adds a lovely deck upstairs. However beautiful, flat roofs have a tendency to leak and leak theirs did, requiring repairs every year. Each winter during the rainy season the ceiling would leak yet again, in a different place from the prior years repair.

My folks decided that enough was enough and used their reverse mortgage line of credit to add on a sunroom to the upstairs deck. This added a lovely, warm winter hideaway that they could enjoy thier lake view from as well as the added bonus of a new sloped roof over the addition. Voila! No more leaks.

All in all the reverse mortgage has made my folks more able to handle the emergencies that life throws at them, and has allowed them to keep their home in good repair and to make changes and adjustments that will allow them to stay in their home for life.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Banning Reverse Mortgage Story - Couple Buys With A Reverse Mortgage

Thu, 27 Sep 2012 17:24:02 -0700

I love my job! One of my favorite Realtors®, Kevin Enriquez and I just closed escrow, and on time, for a great couple who bought a Sun Lakes Country Club home right on the golf course. They love the location of Banning with it’s altitude, afternoon breezes and mild version of the four seasons. They seriously considered paying all cash for their new home, but chose instead to finance the purchase with a reverse mortgage. They put just about 42% of the purchase price in cash into the home which covered the down payment and the closing costs. The rest of the purchase price was financed with a reverse mortgage on the new house. Since there are zero mortgage payments on a reverse mortgage their monthly housing expense is now the same as if they had paid cash! Of course they still have to pay property taxes, homeowners dues and keep their home insured and maintained just as any homeowner needs to do.

The lending limit for Reverse For Purchase is $625,500 at this time and if you are considering downsizing to that perfect home to retire in I would encourage to take a look at a Reverse For Purchase.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Using Home Equity to Fund In Home Care

Tue, 18 Sep 2012 18:40:35 -0700

Awhile back I had the honor of originating a reverse mortgage for a elder who just wanted to stay at home. I was contacted by his son who got my name from a Realtor friend of mine.

Bedridden and in his late 80’s this retired educator, his son and his financial advisor were happily amazed to find that he was like a Timex and just "kept on ticking". Unable to take care of himself physically, he enjoyed the view out of his window, loud classical music and reading science fiction stories. (I like science fiction too!) He was very attached to his caretaker, a fellow with a knack for cooking and the strength, compassion and energy to keep Mr. D engaged, happy and....alive. However, longevity has it’s drawbacks and Mr. D had exhausted his long term care funds and retirement savings. His pension would not be enough to keep up with his desire to stay at home.

As a team they decided that a Reverse Mortgage with monthly “Tenure Payments” would provide enough funds to keep the caretaker on board and even a little extra. Mr. D was thrilled to be able to stay in his home, enjoy his sunny view, his memories and the best home cooking a guy could ask for.

I’ve recently heard that Mr. D doesn’t have to much time left, his health is failing and he has hospice care at home. I’m glad I was able to help him stay there.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Fountain Valley Reverse Mortgage Question

Fri, 10 Aug 2012 20:05:25 -0700

“Debbie, what if I want to make payments on the reverse mortgage?” asked a client in the process of deciding about getting a reverse mortgage.

You sure can and depending upon your age and the type of reverse mortgage you have it could be a decent strategy for you.

None of the FHA HECM Reverse Mortgages have any prepayment penalties so no worries there.
If you have a fixed rate (closed-end) reverse mortgage and you make a payment you will reduce the amount of your next months Current Outstanding Loan Balance. Those prepaid funds are not available to be re-borrowed.

When you look at your reverse mortgage statement each month you will see a line item called “Current Outstanding Loan Balance”. This is the total of what you owe on that statement date. This amount is comprised of what you’ve borrowed plus the accrued interest, mortgage insurance, and service fees if any.

If you make a prepayment the lender will credit the prepayment in a certain order. That order is- First to the part of that loan balance that represents accrued mortgage insurance. Second - to that part of the loan balance that represents accrued servicing fees. Third - the that part of the loan balance representing accrued interest and lastly to that part of the loan balance that represents the principal balance. The net effect of this is that you will reduce the amount of your Current Outstanding Loan Balance.

If you have an Adjustable Reverse Mortgage - "6. BORROWER'S RIGHT TO PREPAY A Borrower has the right to pay the debt evidenced by this Note, in whole or in part, without charge or penalty. Any amount of debt prepaid will first be applied to reduce the principal balance of the Second Note described in Paragraph 11 of this Note and then to reduce the principal balance of this Note. All prepayments of the principal balance shall be applied by Lender as follows: First, to that portion of the principal balance representing aggregate payments for mortgage insurance premiums; Second, to that portion of the principal balance representing aggregate payments for servicing fees; Third, to that portion of the principal balance representing accrued interest due under the Note; and Fourth, to the remaining portion of the principal balance. A Borrower may specify whether a prepayment is to be credited to that portion of the principal balance representing monthly payments or the line of credit. If Borrower does not designate which portion of the principal balance is to be prepaid, Lender shall apply any partial prepayments to an existing line of credit or create a new line of credit." ~Quoted from the Adjustable HECM Promissory First Note.~

This means that on the adjustable reverse mortgage the funds you prepay are available to be withdrawn again. Hence the “open-ended” aspect of the loan. Take a look at a prior post of mine, the Perfect Retirement Loan, to see why this could be a good idea.

I hope that you understand my explanation and if not please feel free to give me a call at 951-283-2983 and we can discuss it. If you disagree with my interpretation of the meaning of the document, I'd love to hear from you too. Comment below and I will do my best to respond clearly.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Reverse Mortgage Question from Chino Hills - Why would someone get a reverse mortgage?

Thu, 09 Aug 2012 13:09:53 -0700

It’s a great question and I’m glad you asked it. I think the best way to answer is to give you some examples of a few of my personal clients. I won’t give you their names, just their stories in a nutshell. You may find a situation similar to yours.

Buy A Home - Baby Boomers (63 & 68) from LA sold their home in San Gabriel Valley to move to the Inland Empire and be closer to their family. Using a HECM for Purchase they bought a single story newer home in a 55+ community. The HECM For Purchase allowed them to finance part of the purchase rather than paying “all cash”. This allowed them to make a sizeable deposit to their retirement and still have no monthly mortgage payment.

Payoff Mortgage - Divorced boomer, she got the house and the mortgage! She used the reverse to payoff the current mortgage and established a line of credit for future emergencies...

Pay for Home Care - Elderly widower, he and his financial advisor planned for a nice long life of till 85 or so, but he kept on going. After he ran out of retirement income, his advisor recomennded a home equity loan, so he did that. He just kept on going, and going, and maxed out the equity line and could not afford his in home care provider. The reverse mortgage paid off the equity line, provided monthly funds for life to pay caregiver AND of course no payment on the loan improved his cash flow position. 100 years old and going strong!

Supplement Income - Young 75 year old, living on social security and small pension, home is paid for but cost keep rising (gas, water, heat, A/C) not to mention insurance, healthcare co-pays.... it all just nipped away at her income. She got a reverse mortgage and split up the benefit into monthly tenure payment for life and a line of credit for emergencies. Now she has extra money each month and a way to handle the big stuff too. (Her son helped her to strategize on how to structure her reverse.)

I’m sure you can think of many “why’s” when a reverse could be a good idea for you or a loved one. And, there are reasons when a reverse is not a good idea - some of those are.

You are planning to sell in the next 5 years.
You live in a multi-generational home.
Your spouse is not 62 years of age, yet.
You don’t have any cash flow problems.

Getting a reverse mortgage is a decision not to be made lightly. If at all possible please involve your family and financial advisors in the process as they can have some valuable input with solutions, ideas and questions you may not have thought of.

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Reverse Mortgage Question from Riverside

Wed, 25 Jul 2012 17:04:44 -0700

“ Aren’t fixed rate reverse mortgages better?”

I get this question, or a variation of it at every appointment I go on.

Most people’s first reaction is to go with a fixed rate reverse mortgage. It’s what we’ve heard thousands of times. “Fixed rate mortgages are the only way to go. I would never get an adjustable.”

When you are contemplating a reverse mortgage though you have to look a little closer. It all depends on your purpose for the loan, how much you need to borrow, what you will be doing with the money from the loan and your intentions for your home.

Remember in the reverse world fixed rate loans are “closed-end loans” and adjustable rate loans are “open-ended”.

Also remember that reverse mortgages require no monthly payments so the interest and mortgage insurance accrue each month to the balance. A negatively amortizing loan in lender talk.

An adjustable rate reverse mortgage allows you to only borrow what you need whereas a fixed will require you to take the entire amount you qualify for.

My opinion:

I like the fixed when a borrower needs most or all of the available funds to payoff an existing mortgage AND they plan to remain in their home for the rest of their lives. The SAVER Fixed and STANDARD Fixed should both be looked at in this circumstance. I even kind of like the adjustable in this situation. A relatively young reverse mortgage borrower could make mortgage payments on the adjustable and establish a growing line of credit they can draw from in the future. Have your financial advisor call me to go over how this works, they may have some even better ideas.

I do like the fixed on a Reverse For Purchase loan. The borrower is usually borrowing the maximum loan possible in order to purchase. The fixed rate reverse works great here as there is no line of credit anyway and the rate is set allowing the borrowers to know to the penny what their loan balance will be over time.

Any loan, reverse included, must be the right “fit” for the homeowner based upon their own individual intentions, needs and finances. Become an educated consumer, ask questions, compare loans and you will know which reverse is best for you, adjustable or fixed.

I’d love to continue this conversation with you so respond in the comments section or email me any questions. Your question could be my next post!

By Deborah Nance

Your Local Southern California Reverse Mortgage Professional