Reverse Mortgages

Reverse Loans and Divorcing

In my previous post I mentioned that since the 1990’s, “Gray” divorce  ( As senior divorce is often referred to) has increased.   As a matter of fact it has tripled and more seniors are splitting up than in any previous time.

More often than not, the “wife” will want to continue to live in the home but is unable to qualify for a traditional loan due to lack of income and cash reserves.

So what happens if one of them wants to keep the home and continue to live in it?

More than likely they won’t have enough income to qualify for a traditional loan and even if they are going to receive spousal support, a lender will not use it for qualifying purposes because there will be no history of it’s receipt to the spouse who has been awarded support.

And what would be her option?

Depending on her age, the value of the subject property and if there are any mortgages on it, she may be able to qualify for a reverse mortgage, pay off the spouse and continue to live in her home.

Her only responsibilities would be to continue to pay property taxes, home insurance and any HOA fees and keep the home in good repair.

Reverse loans are a financial tool.  A tool to leverage the longevity of a retirement portfolio, purchase a home, provide additional income for on going expenses and other aging concerns.

And it’s also an excellent tool that can help the pain of divorce be just a little bit less and allow one of the divorcing couples to remain living in their home and not be displaced.

My description is quite simplistic in this post and the borrower does need to qualify on their residual income, but overall using a Reverse mortgage as part an option to retain the property in a divorce is a very good suggestion and should be considered in the settlement process.


Continue Reading

Seniors Are Divorcing

Divorce is always an emotional and difficult experience regardless of the reason or the age of the two individuals who are experiencing this wrenching event in their lives.

Overall the national average of divorcing couples has declined over the years but what is odd, is that it has tripled for those couples over the age of 65 since the 1990’s.

The reasons for senior or “gray’ divorce vary but some of the more common ones is that after raising their children for many years, they began to see themselves as simply parents and no longer friends or lovers.

Then when the adult children leave the home and start their own lives, an older couple may discover that they no longer have any shared interests as they have grown apart over this period of time.

The financial implications of a “gray’ divorce can be quite complicated in that any assets and or retirement funds could end up being liquidated with disastrous consequences for the couple and their future financial stability and security.

I am not a financial advisor and certainly not a Divorce attorney and not qualified to provide any guidance in this matter and it’s best for couples to always seek professional advice when it comes to something as serious as a divorce and splitting up their assets.

However if there is equity in the home, it may be adequate enough to utilize a Reverse mortgage as a tool to either give half of it to one of the divorcing party’s and or buy them out in exchange for the other party receiving any investments they may have accrued together.

But a property settlement would have to be created by their mutual Divorce attorneys to make a final determination as to how all assets are to be divided.

So how would that work?

Continue Reading

Senior Dilemma

American seniors retain over 6 trillion dollars in their homes and more of them are beginning to use their equity to extend their retirement funds  (Everyone is worried about out-living their savings) by using a reverse loan to leverage their portfolio’s longevity.

Another reason, might be to eliminate an existing mortgage payment and thus free up some extra money each month to be used for other expenses.

But maybe they decide to sell their home instead and take the remaining equity after Broker fees and expenses related to selling it and possibly rent instead of “own”.

What are the costs to the seller if they opt this route?    I’m going to give a very simple example in this post, but obviously it would depend on the sales price, if they are paying off a mortgage and the Broker fee and other miscellaneous expenses related to the transaction.

  • Sales Price:  $450,000 @ 6% Broker Fees   ( Might be less)  = $27,000;  Paying off existing loan $150,000 = $273,000 remaining equity.
  • Now there are the “other” costs associated with the sale of a home.
  • Escrow Fees and Title Insurance Policies  Approx: $1800
  • Repair and any “staging” fees; approx: $2,000 assuming any repairs are minor, etc.
  • Moving expenses.  Local rates can be $25.00 per “mover” and the average cost is $1000 to $2000.  If the move is out of the state then it’s obviously more expensive and can be between $4000 to $8000.   But again, it depends on the amount of items being packed and moved and the size of the home.
  • Surprise expenses:   There is no way of knowing what could happen in the process of selling one’s home.   But it could be more money out of your pocket.  Such as a Buyer wanting you to pay for some of their loan’s Closing Costs.
  • Hassle and stress factor?   It’s impossible to determine the “costs” of the amount of stress just trying to organize, pack, toss and find a new home to live in.
  • And where?   Going to rent or buy?

So if we deduct the estimated costs associated with our fictitious Seller and deduct it from the equity they have leftover after paying the Broker to List and sell their home, they would have somewhere in the “middle” of $260,000 and $245,000 left over after the entire, frustrating experience ends.

Now what?   Rent until the money runs out or possibly consider buying another home, but this time use a Reverse mortgage to purchase it.

In the next post, let’s discuss why using a Reverse loan to purchase a property can be very beneficial method to qualify for a mortgage on a new residence.



Continue Reading

Paperwork Needed for a Reverse Loan

I actually discussed this in a previous post, but to change it up a bit and make it more interesting, I created a short video with terrific music that makes it pretty simple to understand what kind of documents are needed from a borrower.

Of course, depending on their personal situation other items might be needed, especially if the borrower is still working, then pay check stubs and W2’s would be needed and any phone numbers for management companies if the borrower lives in a Condo.

Which is always a good idea, but for whatever it’s worth here is the video.

And please….do call me if you have any questions.



Continue Reading

Jumbo Reverse Mortgages

If a homeowner lives in a property that is valued above 1MM and they would like to have more funds than the FHA HECM would would provide them, they could consider using a Jumbo Reverse loan as an option.

This is a non-FHA mortgage and thus becomes more affordable in the Closing Costs, because the Lender does not charge any Mortgage Insurance Premium/MIP which the FHA HECM loan does.

Given that the value of a property will be capped at $636,150 for the FHA loan, then it stands to reason if the property has considerably more value above that limit, the homeowner may want to consider using a Jumbo reverse loan instead of the FHA option.

Overall, the fees to complete the transaction are lower and just like the FHA HECM loan, there are no mortgage payments, the borrower remains on the Title   ( And in a Trust if that is applicable) and the property goes to the borrower’s estate when the last borrower passes away.

And there are no prepayment penalties if the borrower decides to repay the loan back, typically through the sale of their home.   This also applies to the FHA HECM reverse mortgage as well.

They must pass the Financial Assessment, just like they would on the FHA loan and continue to pay their on going property taxes, Homeowners insurance and any HOA fees that might be associated with the property.

This is an excellent option for anyone who has a very large amount of equity in their home and may want to retire an existing mortgage and it’s payment, have extra funds for monthly expenses or possibly medical bills and care giving costs and increase their monthly cash flow and limit the amount of “draw downs” on a retirement portfolio.

If anyone like to have the details about this loan, it would be best to contact me in that I can discuss the details with you and how you may ( or may not) benefit from it’s use.

It depends upon on each person’s personal circumstances.

Continue Reading