Hello, It's been awhile since I have been here. I am coming back to hopefully get more good advice. This site is very helpful and has very good people. My mother is wondering how she would go about getting a reverse mortgage. My father is a Veteran, and I think I heard where there are Veteran reverse loans. Can someone please tell me if this is true and how you go about it. Also how long does it take? The home is paid off by the way. Thank you all.
He agrees to anything she says. Any help or comments? Thanks
Also the % of $ you can get is not 100% of the appraised value of the home, but depends on what RM program you do, like whether it's a monthly or annual adjusting HECM, or a Fannie Mae HomeKeeper RM.
If you do it, getting a lump sum payment is the most expensive way to do a RM.
Doing it as a line of credit with a variable rate is the least expensive way to go and only use what you need from the line of credit.
Look at the % of the fees to the value of the home. If it is 7% or more, that is high.
If you do a RM, you're best bet is one that is FHA backed. There are RM that are privately funded and your consumer protection on those is limited.
If you do a RM there are 4 things that can be a problem for compliance and cause the RM to be due and payable in full:
- FAILURE TO PAY - property taxes, homeowners /flood/ wind insurance. One issue with RM is that often the homeowner - since the house is paid off - has let their insurance slide or is too low. So instead of the homeowner paying $ 300 a year for insurance, they now have to pay significantly higher rates because there is now a mortgage on the property. The RM will require this. Or instead of selecting your own insurer, the insurance is folded into the RM and uses insurers that the RM selects which can drive up the fees and costs. If you don't pay the taxes & insurance, etc., your mortgage can go into default and be foreclosed upon.
- MOVING TO A NEW RESIDENCE- if reverse mortgage property stops being your primary residence, you are out of compliance with loan. So if you move into a NH or AL or IL, you are required to pay your loan.
- BEING OUT OF THE HOME FOR MORE THAN 1 YEAR - the loan will come due. Most policies have this.
- ALLOWING THE PROPERTY TO DETERIORATE - being away for a while, like a trip or cruise is allowed but if the property gets run down while you are away, the loan could be called in. After Hurricane Katrina, some homeowners who had RM, got letters w/detailed questionnaire as to the status of the home, how it was being secured, status of repairs, utility information, how long until they were back in the house full-time.....this was all about calling in loans that were in areas with uncertainty. Also for many the insurance proceeds for damage went to the RM holder (as they are a lein holder an indicated on the policy) and the homeowner had to be reinbursed for repairs. And Katrina was in 2005 before the real estate market tanked and there were lots more banks doing RM. Not so now.
I think that RM can work for young 62-70 year olds that are in good health, have a home that they own outright, with a property value of 300K or more; do the RM as a line of credit with a variable interest rate; and that the property is in a neighborhood that will likely increase significantly in value over the next 10 - 20 years and they are committed to living in the home for those 10 - 20 years. So that the $$ owed for the RM & fees can be paid off in full from the sale of the house & perhaps the value has increased so that there is even money left.
Talk to an elder lawyer about options.
While there may be such "reverse loan" mortgages designed especially for veterans, the whole idea of Reverse Mortgages is very new and untested. If the home is paid off, but cash flow is a problem then there are many safer solutions than reverse mortgages. Before you take any action on this, please find a trustworthy financial adviser who is certified to advise seniors. You may have to pay a fee but it can save you lots of grief and financial disaster. Do not trust anyone who represents a Bank or Mortgage Firm--especially if their income is based on selling you these new untested financial products--even if they are "endorsed" by Veterans Organizations. As my high school math teacher used to say "Figures don't lie, but liars can figure"