Reverse Mortgages  Zoom Call 5.10.22

By
Real Estate Agent with Mapleridge Realty, CT 203-206-0754 REB.0759001

Reverse Mortgages  Zoom Call 5.10.22

The Zoom call of 5.10.22 was presented by Caroline Gerardo, or CG. She has been in the lending business for over 30 years and aside from some technical difficulties presented the call most expertly.

A reverse mortgage is a type of loan that allows homeowners aged 62 and older to turn their home equity into cash. Most reverse mortgages today are insured by the FHA and are called Home Equity Conversion Mortgages (HECMs).

This allows homeowners to have access to some extra cash without having to sell their homes, having to give up their title or possession, or having to make monthly mortgage payments, provided a homeowner occupies the property as their primary residence. The property owner still has to pay the property taxes, homeowners insurance and property maintenance, and HOA fees.

 

There are pre-requisites in order to qualify for a reverse mortgage. For an FHA type, there is a minimum FICO score of 600, and also for community non-profit and shared equity.  Jumbo requires a 680 FICO score.

There are 4 different ways to pull equity out of the  house. One is tenure and assuming a person is 70, they can set up a monthly payment of $1,000. The second method is called term where they set up payments for a fixed number of years, or establish a line of credit where money is drawn as needed or used with a credit card with money drawn as needed. The last way would be modified tenure which is a combination credit card and payments or modified terms.

Initially, someone would go to the house, which could be 2-4 meetings and if possible get heirs or other family members involved as well. This is necessary in order to determine if the house is suitable for long term occupancy presuming stair. There may also be instances where a real estate agent might get involved it there is a purchase involved. The family accountant may also need to be involved in the decision as well.

Cost to Regulate

The product is more expensive than a standard re-finance. It is regulated and the maximum cost a lender can charge for the product is $6,000 which would come out of the proceeds after establishing the mortgage. It breaks down as $2,500 or 2% of the first $200,000  and 1% on the additional $100,000 increments up to the maximum of $6,500. 

They also pay for the appraisal, title policy, and attorney to handle the documents. Depending on the state, it would be handled as a typical closing. They can stay home and have a notary come for the signing of the documents. They must provide identification which can be a problem for some seniors. Identification could be in the form of a current drivers license, passport, or social security card with some form of photo ID.

 

Advantages of a Reverse Mortgage are that the people can stay in their own home, and community. Do maintenance, or even make an addition.

Disadvantages of a Reverse Mortgage are that the owners cannot deduct the interest payments on the reverse loan. They must watch the amount they draw especially if they are on Medicaid which has income limitations.

When one of the partners dies, the other can continue in the property as a joint tenant or the family can take title as a trust. An LLC is not allowed with a reverse mortgage. They own the property in their own names.

The mortgage is not a recourse mortgage. A standard mortgage is a recourse loan and it can be foreclosed if payments are not made. As they own the home, when both parties on the loan have passed, then the heirs have 12 months to sell the property and repay the loan, or simply refinance the amount drawn on the loan and keep the property. The 12 months allows for probate issues to be resolved.

A reverse mortgage can be a very strong source of income for people that do not have a lot of other types of income. It is a loan that will need to be repaid, typically when the owners have passed on or need to go into a facility with extended care.

Reverse Mortgages  Zoom Call 5.10.22 

 

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Edward (Ed) Silva
Broker Associate

Serving Central Connecticut Sellers and Buyers

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Comments (16)

Jim Patton
Aspire Home Real Estate 209-404-0816 - Modesto, CA
Realtor - Stanislaus ,Merced, San Joaquin Counties

Thanks for the information on reverse mortgages Ed Silva.   I wasn't able to make the zoom meeting today. 

May 11, 2022 03:44 PM
Ray Henson
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA
Realtor

Great recap of our meeting, Ed.  It was another great Zoom meeting!

May 11, 2022 04:34 PM
Anna Banana Kruchten CRS, Phoenix Broker
HomeSmart Real Estate BR030809000 - Phoenix, AZ
602-380-4886

Great recap of the reverse mortgage meeting Ed!  You kept it simple and easy for everyone to understand.  Thanks for doing this every week!  Zoom Rock Star!

 

And I checked with our reverse mortgage lender today.  She said the 'line of credit' amount can and does grow. I called it 'interest' but it's not called that (as interest is taxable).

May 11, 2022 04:39 PM
Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate Brokered by Real - St. George, UT
So Utah Residential, Referral & Relocation REALTOR

Fantastic information for many who are 62+ or older and will not be leaving their home to relatives or those who are limited in income. Thank you for relaying this important information Ed!

May 11, 2022 04:45 PM
Kathy Streib
Cypress, TX
Retired Home Stager/Redesign

Hi Ed- you continue to do a wonderful job of summarizing our Zoom meetings.  I know very little about reverse mortgages and CG did a good job of explaining them. 

May 11, 2022 05:40 PM
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thank you very much, Ed, for sharing this report on the Zoom session.

May 12, 2022 04:37 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

HECMs are a great alternative for many seniors... sadly it's a poorly understood option and you really need to find the right lender to make sure it's done right.

May 12, 2022 05:04 AM
Brian England
Arizona Focus Realty - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

That was an outstanding presentation and I love that Caroline Gerardo shared materials with us as well.

May 12, 2022 05:29 AM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Ed,
Thanks so much for this re-cap. I was unable to log in due to being on the road at the time.

May 12, 2022 06:27 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Ed,

You always do such a good job on the meeting recap.  I wasn't able to come to the meeting but I was able to talk with a mortgage broker about this.

May 12, 2022 07:30 AM
Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

Thank you Ed Silva   I was evacuated last night due to the Coastal Fire but I'm fine and back in my house. If anyone wants marketing materials or the power point feel free to call or email me. Also I mentioned it is possible to market these as a Realtor to list or as a purchase tool for Seniors.

May 12, 2022 07:40 AM
Carol Williams

Caroline. I am so sorry I couldn't log in yesterday. I was on the road. I appreciate Ed's summary. 

May 12, 2022 08:18 AM
Anna Banana Kruchten CRS, Phoenix Broker

Caroline I heard about the fires.  Glad you are ok and back home.  I really appreciate you putting together this presentation.  A lot of excellent information.  Thanks again!

May 12, 2022 11:27 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

There was a lot of great information there and the clearing up of some misinformation as well

May 12, 2022 09:30 AM
Eileen Burns
Trans State Commercial RE Ft. Lauderdale/Miami/Palm Beach - Fort Lauderdale, FL
FLorida Real Estate Connector

Thanks for the recap Ed Silva .  I, too, was unable to make this call.  Thanks Caroline Gerardo and sorry about the fires.  Stay safe😎

May 12, 2022 10:40 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Ed:

Great job on the recap! CG did a terrific job presenting so much information, much of which I did not know. She would be a great resource if one has clients who could benefit from a reverse mortgage.

Jeff

May 12, 2022 10:59 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Ed, reverse mortgages are becoming popular again, so the information Caroline shared with us on the weekly ActiveRain ZOOM call is very timely.

May 12, 2022 12:22 PM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Ed - you really did a very comprehensive recap the presentation.  So much to learn.

May 14, 2022 04:54 AM