Guest Post by Doni Dolfinger
Have you ever worried about staying in your home for as long as possible? Have you ever worried about paying the bills? Have you been more than a little intrigued by the advertisements for reverse mortgages? Let me share with you one story, which made it all possible.
Mr. Good (not his real name) enjoys living in the picturesque mountain home he had built in 2007. His plan was to live his retirement years in the beautiful Rocky Mountains where he could take advantage of the laid back lifestyle.
With recent health issues, a hospital stay, and mounting medical bills, he found his easy lifestyle interrupted with concern that he might have to sell and move in order to pay his bills and cover the cost of additional care that he now requires.
Mr. Good discussed his financial options with family members and his attorney. The solution they opted for was an FHA Insured Reverse Mortgage also known as the Home Equity Conversion Mortgage or HECM. The reverse mortgage program allows homeowners 62 plus to borrow some of the money from their home without a required mortgage payment. Instead of making payments he can how have payments made to him to cover his expenses.
The reverse mortgage may be set up to disburse funds monthly, as an initial draw, as a line of credit, or combination. Mr. Good’s free and clear mountain home appraised for $338,000. Based on his age of 78, the value of the home and the interest rates at the time he secured his loan, he qualified for over $210,000. He chose to receive $3,000 a month for three years, $30,000 initial draw to pay off his medical bills, and left $81,000 in a line of credit he may use anytime for any reason.
When he moves, sells or dies, the reverse mortgage is usually paid back from the sale of the home and any remaining equity goes to him to live elsewhere or to his estate. The lender does not “keep” the home, although that is a common myth.
If he wants to change his payment plan he may do so for a $20 fee, so the plan is flexible as needs change.
The reverse mortgage is insured by FHA so if Mr. Good exhausts all of his funds or is “upside down on his loan” he can rest easy knowing that he doesn’t have to move and any loss is covered by FHA through mortgage insurance that is factored into the loan. In order to stay in good standing on his reverse mortgage, Mr. Good is required to live in the home as his primary residence, take care of it, and maintain his property taxes and homeowners insurance. These are things he has been doing already so he is comfortable with these requirements.
He and his family were relieved to know that the title remains in his name; he can choose to sell and move, refinance or pay off the reverse mortgage at any time. FHA requires counseling by an FHA approved counselor to insure the borrower has adequate information with which to make an educated decision about this program.
If you have questions, would like a list of FHA Counselors or would like a free information booklet, you may contact Doni Dolfinger, Reverse Mortgage Specialist at Universal Lending Corp. She is a seasoned Reverse Mortgage Specialist of over 20 years and may be reached at 303-791-4786 or 303-378-8905 License# 100017629 NMLS #266569 Regulated by the Division of Real Estate.