Reverse Home Mortgage Helped Grandma

by Scott from Delaware, Ohio

How a reverse home mortgage helped Scott's Grandma: Scott writes to Ask Kate... Because of a reverse mortgage, my grandma enjoyed her later years. I would recommend a reverse mortgage to any elderly person who outright owns their home.

My grandmother did this after my grandfather died. She was in a pinch financially, as they had both lived much longer than they had planned for (she died when she was 98!).



My mother suggested she look into a reverse home mortgage and, with my mom's help, they found one that worked for her. When my grandma died a few years later, mom sold her home. The sale of the house paid off the mortgage and also gave mom her inheritance.
Reverse Home Mortgage Helped Grandma

It worked out great for grandma. She had enough money to do some things she wanted to do and to just make ends meet as well. I feel these loans, at least the one grandma took out, are safe if you are smart about it.

Realize that you are basically giving your home to the bank and that you will be taking away from any inheritance you may have been leaving your relatives.

Also realize that there are fees and points with these types of loans, so you will not get 100% of what your home is worth.

But reverse home mortgage is still better than going hungry!

Thanks for letting me tell Grandma's story,

Scott from Delaware, Ohio

Ask Kate: Reverse Mortgage Interest


By Dru from Crete, Illinois

Kate,

What type of interest do reverse mortgages charge - simple or compound?

Ask Kate answers: Reverse Mortgage Interest


Dear Dru,

Good question! It is important to know that because no payment is being made, interest is added each month to the loan balance. In other words, the reverse home mortgage is a rising-debt program.

However, in spite of compounding interest, you (or your heirs) will never owe more than your home's value at the time the loan is repaid.

But do not get this confused with the compound interest of a negative amortization mortgage. Also known as Neg Am ARMS, the monthly minimum payment does not cover the interest due each month. Thus, the unpaid interest is rolled into the balance every few years and becomes the basis for calculating future payments.

Best wishes,

Kate Ford

Ask Kate: Repayment of Reverse Mortgage


By George F. from West Palm Beach,Fl

Kate,

Do I have the option to payoff a reverse mortgage loan at any time before the mortgage is due because of my passing away?

Ask Kate answers: Repayment of Reverse Mortgage


Dear George,

In most cases, there is no financial penalty if you choose to prepay your reverse mortgage. But borrowers should make sure they ask for and receive a signed and dated document stating this.

Go here for more on Paying Mortgage Prepayment Penalties.

Best wishes,

Kate Ford

Ask Kate: More than One Reverse Mortgage


By John C. from Albia, Iowa

Kate,

We now have a reverse mortgage on the home we own in Iowa. We are moving to Arizona. After paying off our reverse mortgage in Iowa, may we qualify for another one on our new home in Arizona?

Ask Kate answers: More than One Reverse Mortgage


Dear John,

Yes, unlike the HARP refinance program, you should be eligible for another reverse mortgage plan.

Best wishes,

Kate Ford

Reverse Mortgage Help for Senior Citizens

What Is a Reverse Mortgage? Specialty mortgages created to produce income without a monthly payment.

Will heirs become responsible for homes financed with a Reverse Home Mortgage?

Learn who can help homeowners evaluate Reverse Mortgage Income for Seniors before refinancing.

Meet the stable FHA Reverse Mortgage Refinance Program (HECM) and learn the payment options.

Introducing the FHA Reverse Mortgage Purchase Program (HECM) for Senior home buyers.

Seniors and family members Ask Kate for Reverse Mortgage Information.

Important: Senior homeowners should consult a financial planner, tax accountant, and/or attorney as applicable to evaluate their circumstances before financing with a reverse mortgage. Even if not a loan requirement, reverse mortgage counseling is highly recommended.


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Cash-Out Mortgage on Mom's Home
by: Kevin from Nashville, TN

Hi, My mom is 85 and owns her home ($168,000 appraised value). Her monthly income is $1523. She has $24k on credit cards.

Can she borrow $25,000 against her home's equity (as in a mortgage loan) at her age?

Thanks, Kevin

Hi Kevin, Kate here. The federal government prohibits lenders from declining a mortgage loan based on age. No different than an 18 year old barely of contractual age, an 85 year old will need a strong credit history, sufficient income, and enough equity in her property to qualify for a mortgage.

If you are thinking of a 2nd mortgage vs a cash-out 1st mortgage, guidelines vary quite a bit between banks. So don't hesitate to shop around.

You might also consider a reverse mortgage which provides income for Senior Homeowners based on equity in homes but with no monthly payment. See my series on What is a Reverse Mortgage for an explanation of this ingenious loan program.

Best wishes, Kate

Click here to add your own comment.

You can also ask Kate about your mortgage at Best Mortgage Advice Social Networking Hotline.

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