This Is Not Your Father’s Reverse Mortgage Program

Senior couple meeting architect for building project

Would you like a somewhat simplified explanation of what a reverse mortgage is?

Essentially, a reverse mortgage is a Home Equity Line of Credit (HELOC) for seniors where the bank agrees to be patient.  In other words, the bank agrees not to require any monthly mortgage payments for as long as either the husband or the wife still lives in the home (there are a couple of requirements, such as keeping taxes and adequate homeowners insurance current and keeping the home in habitable condition, etc…).  This allows the homeowner to live off the equity in their home without having to worry about making monthly mortgage payments as long as they are living in the home. This is especially helpful when most seniors have difficulty qualifying for a traditional Home Equity Line of Credit (HELOC). Because of the Income qualifications, minimum credit scores and the debt ratio requirements, many seniors cannot qualify for the Home Equity Line of Credit (HELOC) that they need.  However with the Reverse Mortgage HELOC for Seniors (RELOC), income, credit scores and debt ratios are not currently considered.  Since currently interest rates are low (below the HUD floor in some cases), how much the Senior is eligible for with a RM HELOC for Seniors is primarily based upon their age(s) and home value.  Regarding age, the older the senior, the higher the % of home value they can access.  In other words: In the Reverse World…”it’s good to be old.” The older you are the more you get and quite simply all senior homeowners are currently eligible regardless of health, income or credit scores.  Also, the home does not need to be paid-off in order to get a RELOC.

Some claim that fees are high. When you compare it to a traditional mortgage or HELOC, the fees are higher.  But is it expensive, when you consider that a RELOC borrower can never lose their home due to non-payment?  In fact, they might live there for another 15-25 years (program ends at age 150).  It’s simply a different type of loan with some special protections that all senior homeowners are eligible for.  That’s why they are HUD/FHA insured.  It’s the HUD/FHA insurance fee that is the most expensive fee but also the reason that Reverse Mortgages exist today. The insurance provides protections in case of home value decline.  For example, if the home value declines, unlike a traditional HELOC, the monthly payments, or size of the line of credit cannot be reduced.  Even if the home declines to half its original value, the original benefits remain unchanged, because it is HUD/FHA insured (as long as they are otherwise compliant. e.g. prop taxes etc…).  Also, on some programs available now, some fees are waived.

So if he/she needs a HELOC for living or homecare expenses, the RELOC is a solution option, including the mini-RELOC with significant fees savings. 

If the senior prefers to down size to a more age appropriate home and save money, he or she can save a lot of cash by using the Reverse Mortgage in a Home Purchase program.  The Reverse Mortgage for Home Purchase is used to purchase the new home that the 62+yr old will live in.

If you would like to discuss Reverse Mortgages with an expert, contact Richard SanVicente of Security One Lending at www.RickSanVicente.com .  Rick specializes in the Reverse Mortgage products.