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Reverse Mortgage for Purchase - NOT selling another property
Here is how it works for a current owner:
Let’s start with the example of the traditional Reverse Mortgage, which is done when someone already owns the home, has equity, and either wants to cash out or pay off their current mortgage without requiring future payments:
So John and Sally are 62 years old.
Their value is 200k, and they owe 100k.
Based on their age they have a benefit (or available loan amount) at approximately 60% of their value, which is 120k in this example.**
SO THEY USE THE MORTGAGE PROCEEDS OF 120K TO PAY OFF THEIR CURRENT MORTGAGE (eliminate their payment) AND CASH OUT THE REMAINING 20K TO USE AS THEY PLEASE.
Of course, if they owe nothing, then they keep the entire 120k.
Reverse Purchase NOT selling another property:
Using the same numbers from above; John and Sally must CREATE THE EQUITY IN THEIR NEW PURCHASE of a 200k house to qualify for the Reverse Mortgage for Purchase.
What does that mean?
If they needed 40% equity in the previous example, which was 80k of the 200k value, to qualify for the Reverse Mortgage Refinance, then their new down payment is ... more
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