Reverse Mortgage Question From Fresno: If I own my home free and clear why can’t I get all the equity out of it with a reverse mortgage?
So you have heard about a reverse mortgage and how it can benefit you! You have heard that you can use your home equity to live on. You have heard that its free money. You have heard its the best way to use your home equity.
Yes, it is true that it is the best way to use your home equity. However, there are many misconceptions about reverse mortgages. Many of these misconceptions create very disappointed seniors when they start investigating and talking to professional reverse mortgage loan officers who know the details.
Recently I had a call from a senior from Fresno, California. She had received my phone number after going to her local Wells Fargo branch in Fresno and inquiring about reverse mortgages. She started her conversation by telling me that her home was worth $280,000 and she wanted to take out $200,000 to fix up her home and put the rest in savings.
First, I had to ask her where she got her home value estimate. She proudly told me that her grandson, who is very good on computers, researched it and that is how much her home is worth. I then had to explain that we would have to have an FHA appraiser appraise her home to determine a value that the bank would be willing to loan.
Second, I asked her where she got the information about reverse mortgages. She told me that her neighbor got one 20 years ago and he told her that he was able to take out all of his equity. I explained to her that FHA had changed some of its guidelines and that she would not be able to take out that much of her equity.
She told me that she did not owe anything on her home and it was free and clear. I scheduled a meeting with her to go over the details about what she could get from her home.
After sitting down with her and explaining the ins and outs of a reverse mortgage, her next question is, if I can only take out 60% where is my other equity going?
This is such a good question and one that is frequently asked. The equity stays in the home. Essentially this is where the payments for your loan is coming from. When you move from the home or you pass away, the equity that is left belongs to your estate. The home is still yours until that point. As long as you live here you never make any mortgage payments.
She nodded her head that she understood. I explained that she would now need reverse mortgage loan counseling and that any questions she had could also be asked of this counselor.
She is now scheduled for her counseling and looking forward to moving forward. Once the seniors understand how it works they are comfortable with the reverse mortgage process.
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