Unlike a regular mortgage, which demands that you pay back a bank for a loan to get a house, a reverse mortgage is a loan to you that's secured by the value of your home. The loan is usually paid back, with interest, from the proceeds when you or your heirs sell the house.
The minimum age to be accepted for a reverse mortgage is 62. But the older you are and the larger the value of your house, the more that you can borrow which might be the key to saving your house from foreclosure. A widow with a girl in college had been wrestling to maintain her home. She agreed to borrow $121,450 in a subprime mortgage, and used some of the cash for new gutters and other repairs. But the advantages of the loan were overweighed by the heavy regular payments, which gobbled up almost all of her revenue.
She slipped behind on her payments, and her home was slated for foreclosure in Apr 2008. That is when the Home Defense Program of the Atlanta Legal Help Society, stepped in. First, they swayed the mortgage servicing company to accept a payoff of $100,192, about $40,000 less than it was owed including late charges and penalties.
Then they organized a reverse mortgage on the home, which was worth $179,500, so she could make the payoff. Reverse mortgages could be a lifeline for older house owners who can't benefit from the foreclosure prevention plan expounded by the Obama administration, which, with similar plans, is focused on whittling home loan payments to about 1/3 of a borrower's gross revenue. Such plans don't help seniors on small fixed incomes who could not pay a once a month bill whether or not the interest rate were slashed.
An advocate has to help the house owner begin the process of getting a reverse mortgage, while at the same time working to stop foreclosure action and most likely convincing the bank to accept a payoff that is less than what's owed. When details of a loan are obviously illegal, violating rapacious lending laws that were in place when the loan was made, one of the first routes is to work out if a suit can be brought against the lending corporation, saving the senior's home that way. Many loans are not technically illegal, but it is apparent that they should not have been made to an older person on a fixed earnings. The second hurdle is preparing the reverse mortgage itself. Historically, these loans are used to give folks with almost no mortgage debt a one-off sum or monthly revenue to pay costs while they live in their home. The older the homeowner and the bigger the home equity, the additional money a reverse mortgage will yield. But when there is a large mortgage, mixed with today's dropping home costs, the house owner might have very little equity. In that position, a reverse mortgage can be tough to get.
Why not a reverse mortgage? Even for people that qualify, reverse mortgage loans are not always the best option. They are awfully costly because the majority of the loan fees are based primarily on the full price of the home, up to a state program limit of $625,500. In typical mortgages, costs are based mostly on a proportion of the amount you can borrow. Accumulated loan charges aren't tax-refundable till the loan is paid back totally generally at some point in the distant future. Since the loan grows bigger over time, it might be tough to leave the home debt-free to a successor. Each householder who receives a federally insured Home Equity Conversion Mortgage, the most well liked kind of reverse mortgage, must first receive support from one of the governing body or non-profit housing support agencies authorized by the U.S. Office of Housing and Urban Development. Many professionals think such analysis should be made more generally available to seniors looking at repossession.
Get a quote using our reverse mortgage calculator to see if this might be a solution for you.
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