Reverse Mortgage – Frequently Asked Questions – Part 1

How much money will you receive from a reverse mortgage?

Reverse Mortgage – Frequently Asked Questions – Part 1The amount of money that can be received from a reverse mortgage usually ranges between 40% and 60% of the home’s appraised valuation. In situations where the seniors are older, the amount of money they can receive in the reverse mortgage is usually higher.

What are the factors that are used by the financial institutions to determine the amount given to the homeowners?

There are 3 factors that are used to underwrite the homeowner:

  • The age of the youngest of the homeowners,
  • The value of the home, and
  • The current rate of interest.

If there is an existing mortgage on the home or other liens, they must be paid off at the time a reverse mortgage is taken out. There are also closing costs involved in obtaining a reverse mortgage.

How does the homeowner receive their funds?

The homeowner can receive their funds on the reverse in any of the following manners:

  • All the money at once;
  • Line of credit that the homeowners draw against;
  • Firm payments on a specific schedule;
  • Guaranteed payments for as long as the homeowner lives.

How does a low credit score impact the homeowner’s ability to obtain a reverse mortgage?

Unlike in traditional mortgages, a low credit score is not a significant drawback when obtaining a reverse mortgage.

How does someone qualify for a reverse mortgage?

There are a variety of qualifications necessary to meet the standards of obtaining a reverse mortgage.

  • To start with the homeowner must be at least 62 years of age.
  • They must own their home and it must be their primary residence.
  • There must be equity in the borrower’s home.

What are the benefits, if any, of homeowners obtaining a reverse mortgage?

Benefits of obtaining a reverse mortgage:

  1. As long as the homeowner complies with the terms of the loan, they don’t have to make any payments on the loan.
  2. With a reverse mortgage homeowners will not lose their Medicare benefits or Social Security benefits.
  3. Homeowners sometimes end up owing more than the equity in their homes. (The loan is underwritten.)
  4. Reverse mortgages can provide homeowners with a sense of financial freedom. It gives them cashflow to live with dignity.

schlissel-headshotThe law firm of Schlissel DeCorpo LLP has been helping families deal with mortgage and foreclosure problems for more than 30 years. We can be reached at 718-350-2802, 516-561-6645 or 631-319-8262 or by e-mail at info@sdnylaw.com.

When Should A Homeowner Take Out A Reverse Mortgage

When Should A Homeowner Take Out A Reverse MortgageA reverse mortgage is a relatively complex financial product. It requires careful consideration by the homeowner before undertaking to get involved in a reverse mortgage. Here are some of the situations where a reverse mortgage may be applicable for homeowners:

  • The homeowners are running out of money and may want to stay in their home until they die.
  • If the homeowners are in a position to sell their home, and then can purchase a smaller less expensive home, this will generally be a better route to take then obtaining a reverse mortgage.
  • The homeowner must be capable and healthy enough to live in their home and maintain it for a reverse mortgage to be an acceptable alternative.
  • The reverse mortgage is not a good idea if the homeowner wants their children or heirs to inherit their home.
  • The reverse mortgage may be a good idea if the reverse mortgage creates a source of income for the homeowners which gives the homeowner sufficient income to live in their home and maintain the home.

Before homeowners get involved with a reverse mortgage, it is recommended they consult with an attorney that is knowledgeable regarding reverse mortgages.

schlissel-headshotThe law firm of Schlissel DeCorpo LLP has been helping families deal with mortgage and foreclosure problems for more than 30 years. We can be reached at 718-350-2802, 516-561-6645 or 631-319-8262 or by e-mail at info@sdnylaw.com.

Video : What you can use reverse mortgages for

Video : The different types of reverse mortgages

Video : Whether reverse mortages are a good idea?

Video : Reverse mortgages loans on co-op apartments

Reverse Mortgages For Co-ops

Reverse Mortgages For Co-opsOn May 20, 2022 a new law went into effect in New York State which allows owners of co-ops to apply for reverse mortgages. Up until the time this statute went into effect, seniors who wanted to obtain a reverse mortgage on their co-op apartments, were unable to do so. The reason for this is that co-ops are not real property under the law in New York State. The owners of a co-op have a personal property interest in the shares of the cooperative apartment corporation.

Co-Op Mortgages and How They Work

In a regular mortgage the borrower receives a loan and immediately starts making scheduled monthly payments. In a usual reverse mortgage on a home, the borrower, ages 62 or older, resides in the home and if it is their primary residence, they can and apply for a reverse mortgage.

The borrower receives loan proceeds, but the repayment on the loan is deferred until the borrower’s death, sale of the of the property or when the borrower permanently relocates out of the property, or defaults on other terms of the loan. The reverse mortgage loan is secured by the home occupied by the borrower as their primary residence.

A Reverse Cooperative Apartment Loan

A reverse mortgage for a Co-op is called a reverse cooperative apartment loan. In this case, the borrower age 62 or older can apply for the reverse mortgage. The apartment must be the primary residence of the borrower. Every year on the anniversary date of the loan the borrower must recertify that he or she is still living in

this apartment. In any situation where the homeowner is out of the apartment for a period of 12 months or more due to physical ailment or illness, it no longer qualifies as his or her primary residence.

The Loan Proceeds

There are several ways the borrower on a reverse mortgage can receive the proceeds of the reverse mortgage. He or she can receive it in equal monthly payments. They can receive it in a fixed number of payments. They can have a line of credit option where they can remove the proceeds up to the amount of the loan.

In Co-op reverse mortgage cases, the Co-op board of Directors must approve the reverse cooperative apartment unit loan. It is unknown how boards of directors of co-ops will respond to applications to allow homeowners withdraw the equity from their homes.

schlissel-headshotThe law office of Schlissel DeCorpo have been defending homeowners regarding mortgage issues for more than three decades. They can be reached at 516-561-6645, 718-350-2802, 631-319-8262 and 914-998-0080 or emailed at Elliot@sdnylaw.com.

REVERSE MORTGAGES: ARE THEY A GOOD IDEA?

REVERSE MORTGAGES: ARE THEY A GOOD IDEA? Many Americans, as they reach their retirement years, find they have not saved enough money to pay all of their bills. One of the ways seniors can deal with their expenditures is to obtain a reverse mortgage. Reverse mortgages can make up for the fact that seniors do not have sufficient assets to cover their expenses during their period of retirement.

THE REVERSE MORTGAGE

A reverse mortgage is available to individuals who are 62 years of age and older. The way the reverse mortgage works is no repayments need to be made until the homeowners die or the home is sold. When the homeowners die, their beneficiaries have up to a year to refinance the home, buy it or sell the house. If the home is sold and the proceeds from the sale are greater than what is owed on the mortgage, the heirs of the decedent keep the balance of the proceeds in excess of what is owed.

HOW REVERSE MORTGAGES WORK

Seniors who take out reverse mortgage do not have to make mortgage loan payments during the rest of their lives. However, they have to pay for real estate taxes on the house, insurance on the house and they must maintain the premises in a good condition.

TYPES OF REVERSE MORTGAGES

There are three different ways a homeowner can receive funds from the reverse mortgage. The first is in a lump sum payment. The second is a line of credit which they can draw on whenever they need money to pay bills. The third is called the stream of income. Set amount of payments on a monthly basis are sent to the homeowner. When a reverse mortgage is taken out, if there is an existing mortgage on the property, the funds from the reverse mortgage must first be used to pay off the existing mortgage, and then the balance of the funds becomes usable money for the homeowners as part of the reverse mortgage.

USES FOR REVERSE MORTGAGES

Families who have homes with significant equity in them can take out a reverse mortgage and use the equity to subsidize their lifestyle or to provide a cushion which can help them deal with unexpected expenses.

REVERSE MORTAGE FORECLOSURE

A reverse mortgage foreclosure can be brought by the financial institution if the homeowner doesn’t pay the taxes on the house, maintain the premises or pay the insurance on the house. In addition, the financial institution, if they are not paid off within a year of the homeowner’s death, can initiate a foreclosure lawsuit.

schlissel-headshotThe law office of Schlissel DeCorpo have been defending homeowners regarding mortgage issues for more than three decades. They can be reached at 516-561-6645, 718-350-2802, 631-319-8262 and 914-998-0080 or emailed at Elliot@sdnylaw.com.

Reverse Mortgage Foreclosure Issues

Mortgage-Foreclosure-IssuesReverse mortgages are made to homeowners aged 62 or older. They allow the homeowners to access the equity in their home to pay their bills while allowing them to continue to live in their homes. In situations involving reverse mortgages the homeowner no longer makes monthly payments. The amount owed to the financial institution gets charged against the homeowner’s home equity and these loans are usually insured by the Federal Housing Administration. The reverse mortgage is not due and payable until the homeowner’s death.

Taxes and Insurance on the Home

Although the homeowner does not have to make mortgage payments, the homeowner is usually responsible for paying the property taxes, school taxes and maintaining their homeowner’s insurance. The failure by homeowners to pay these expenses can cause the financial institution that provided the reverse mortgage to bring a foreclosure lawsuit based on the homeowner’s non-compliance with the conditions involved in the mortgage.

Reverse Mortgage Foreclosure Default

New legislation requires reverse mortgage defaults now have to receive a 90 day preforeclosure notice under the Real Property Actions and Proceedings Law Section 1304. The amendment to this law causes financial institutions to participate in mandatory settlement conferences with regard to working out alternatives to foreclosing on the home regarding reverse mortgages.

The new reverse mortgage law indicates a list of the items that can trigger a reverse mortgage foreclosure. These include:

  • failure to include a required certificate of occupancy on an annual basis
  • death of the named borrower
  • failure to pay real property taxes
  • failure to maintain homeowner’s insurance
  • failure to pay water bills and sewer bills
  • failure to make required repairs
  • failure to occupy the home as a principal place of residence

Conclusion

This new legislation provides homeowners who have reverse mortgages many of the same protections homeowners who have conventional mortgages have. In addition, it provides them with notice as to any of the possible items which could cause their home to go into foreclosure.

schlissel-headshotElliot S. Schlissel is a foreclosure lawyer representing homeowners throughout the Metropolitan New York area for more than 45 years. He can be reached at 800-344-6431 or e-mailed at Elliot@sdnylaw.com.

Reverse Mortgages: Should You Consider One?

Picture of a home

Reverse mortgages are usually taken out by seniors to unlock the equity in their homes. However, there are pros and cons as to whether a reverse mortgage is the appropriate thing to do.

Facts About Reverse Mortgages

Reverse mortgages are mortgage loans taken out by individuals at least 62 years of age. The theory behind a reverse mortgage is that the equity in the home will support the reverse mortgage and the mortgage will be repaid when the homeowners die. Reverse mortgages do not have to be paid as long as one of the borrowers is still living in the home. The funds received from the reverse mortgage can be taken in a lump sum, as a line of credit or in monthly payments.

Reverse Mortgages vs. Traditional Mortgages

In a traditional mortgage the homeowner takes out a mortgage and then makes monthly payments until the mortgage is paid in full. The monthly payment represents both the payment of principal and interest due and owing on the principal. With regard to reverse mortgages, the homeowners do not have to repay the reverse mortgage on a monthly basis. It is usually paid after both of the homeowners die or both of the homeowners are no longer living in the home.

Benefits of a Reverse Mortgage

One of the most significant benefits of a reverse mortgage is the home will not be foreclosed upon and the homeowners will not be forced out of their home because they can’t make monthly payments. Reverse mortgages give homeowners peace of mind knowing they no longer have a monthly payment they need to make to the bank.

Some Disadvantages of Reverse Mortgages

Banks are usually very conservative with regard to how much money they will provide a homeowner with pursuant to a reverse mortgage. When the homeowners die, the homeowners’ heirs will either have to have the home sold to pay back the reverse mortgage or they will have to come up with the balance due on the reverse mortgage. Reverse mortgages generally have higher interest rates than traditional mortgages.

Conclusion

If you are considering a reverse mortgage you should first shop around to several different financial institutions. You should compare the interest rates offered on the reverse mortgage from each of these institutions. If you are not sure as to whether a reverse mortgage is the appropriate avenue for you to pursue, you can consult with an elder law attorney to help you make this decision.Attorney Elliot Schlissel

Elliot S. Schlissel, Esq. is a member of the National Academy of Elder Law Attorneys representing seniors throughout the Metropolitan New York area.

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