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Real Estate Transitions: Using a Reverse Mortgage to Stay or Move

  • Written by The Blue Team

by The Blue Team: Michelle Blue & Ashley Farrington, Windermere Woodinville

Many people have heard about reverse mortgages but don’t really know what they are.

To put it simply, a reverse mortgage is where the payment stream is "reversed" and instead of making monthly payments to a lender, the lender makes payments to you. 

If you, or a loved one, is 62 or older, a reverse mortgage can help convert 50-66 percent of the appraised value into cash without having to sell the home, give up title or take on a new monthly mortgage payment.

It can also be a way to purchase a new home without having to make monthly mortgage payments.

What does that really mean?

• Stay in your home and be able to access part of the equity you have built in order to consolidate debt, eliminate mortgage payments, cover unplanned medical expenses, pay for in-home care, remodel home for current needs, avoid foreclosure, supplement retirement income, or any other need you may have for cash.

• Purchase a new home that provides more affordable living, is smaller and easier to care for, is on a single level or more accessible, is closer to friends or family, or even is the dream home you have always wanted.

• Features of Loan Program: FHA insured, no monthly mortgage payments (must continue to pay home insurance, property taxes, and home maintenance as needed); retain title to home; non-recourse loan (no recourse to borrower/estate/heirs if loan balance exceeds the home’s value at maturity as long as the home is sold to pay off the debt or balance is paid in full if borrower/estate wants to retain property); right to remaining equity (any equity that remains in the property after the reverse mortgage is retired, belongs to borrower/estate/heirs); no time limit on length of time staying in home; mandatory mortgage insurance premium (ensures that the mortgage balance will be paid in full, if the home sells for less than owed); a single set of closing costs when purchasing a home; and funds are available as a line of credit or monthly payment.

• Qualifications: Homeowner must be 62+, the home in name of homeowner and is primary residence, must have at least 50 percent equity in home or ability to make a monetary investment at closing from an allowable funding source, must occupy property within 60 days, mandatory counseling session required, and must be able to and continue to pay taxes and home insurance.

• Eligible Properties: Single family, 1-4 unit, FHA approved condos and town homes, meets minimum FHA property standards, within maximum FHA loan limit ($625K currently), no other 1st or 2nd liens against property and any existing mortgages must be paid off with the loan proceeds.

We are not lenders, but can recommend a fabulous Reverse Mortgage Loan Officer if you’d like to explore this further. The Blue Team – working twice as hard for you and providing a team of experts to guide you in all your real estate transitions!

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