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Sunny - age is a legitimate factor in determining a credit score for lending. An 80 yr old will be off the charts for 20 or 30 yr traditional mortgage; so they will either not qualify at all OR will have to do a huge deposit with maybe 5 or 10 yr mortgage through a speciality lender. Condos builds in retirement areas do these often.
But RMs are not traditional mortgage in the usual sense with the individual borrower qualifying for the loan to buy a house, but it’s more the existing property is borrowing the $. The RM amount is based on the property value not the credibility of the owner. JessieBelle was spot on in that it’s maybe 50% of the value of a fully paid off home that will be the RM max.
RMs seem to be often just a band aid on a much bigger financial & health problems for an aging elder.
I believe you can only borrow about half of the equity in your home. You will want to consider this carefully. The fees for the RM are very high, as is the interest rate of the loan. If you have any heirs they will have to deal with the RM by either paying back or by selling the house, then paying it back. You'll be expected to maintain the property, insurance, and taxes out of your own pocket. I've often said that the only people who can afford a RM are the people who don't need them.
Have you considered selling the house and downsizing to an apartment. It may make the most economic sense. Let us know a little more about why you would like a RM. They are okay if you want to stay in your home, have no heirs to worry about the house, and don't have to enter a nursing home or apply for Medicaid. You have to be very careful with them. Many people get into them, then wish they hadn't. Very few companies even offer them anymore, they can cause such problems.
I don't think RMs will fund up to full market value. It's probably a percentage of that.
Not to be nosy, but may I ask why you're considering an RM? Are you aware of how financially dangerous they can be, such as the fact that they're negatively amortized?
These are serious and in my opinion not safe debts to incur.
Another thing to remember with RMs is that since you are getting a new mortgage; it will mean that the property needs to be fully insured for the new debt with the RM listed as a lien holder.
Often if the elder owns a home and has for years or decades, they more than likely have a very low priced homeowners policy based on 1970s, 1980’s. The new RM (like all mortgages) will require updated full coverage insurance & if your area has other perils - like flood, earthquake or windstorm - you will need to have these coverages in addition to the general homeowners policy. It can be very very expensive..... where I am in the New Orleans area folks can need homeowners, flood AND windstorm and it’s not usual to hear of 5-10k annual insurance costs. Insurance payment is the property owners responsibility.
I would do complete research on this type of thing, including how it could affect you down the road financially. As far the age goes, I would question if they can use your age against you in a home loan. I think there is a federal law about not being allowed to do that.
Definitely not a loan to go into without extensive research regarding other options. At your age I wouldn't expect it to be a good move. They only lend a percentage & that's based on home appraisal & your age. I secured an RM on my mothers home at 88 & we were given access to 85% of the value. You will be required to go through counseling before signing & I urge you to take advantage of that. They help you look at other options. In my opinion at your age downsizing may be a better option or a conventional loan.
Depending on your needs/goals, a Reverse Mortgage can be a good option. The % they will loan increases with age. The fees are NOT outrageous unless you choose one of those big lenders that use Hollywood actors to recommend their product - my lender waived all fees. You do have to keep your home insured for replacement value, pay your taxes and maintain the home - the SAME as if you live there with a conventional loan or debt free. And besides the interest the lender charges - now about 4% - your another 1.5% will be charged against your loan balance monthly for mortgage insurance. Any good mortgage broker will explain ALL the options to you and is required to provide a 1-page form showing any fees, closing costs, interest and mortgage insurance (MIP), and amount you will receive - so you can compare lenders. A RM can be foreclosed - for the exact same reasons a conventional mortgage can be foreclosed - so one is not more "dangerous" than the other; in both you...and they...must honor the agreement. For all those who recommend getting a conventional loan instead - the problem is usually that we don't have sufficient income to pay a regular mortgage. It's not that a Reverse Mortgage doesn't have to be paid - it does - but you don't have to make monthly payments. Instead, the interest and MIP increases monthly as a percentage of what you borrowed and that total becomes due when you sell or move from the home. Ostensibly, the value of the home at that time will repay the loan; if not, the mortgage insurance will kick in the balance. In my opinion, the REAL consideration of whether or not to use an RM is whether you might l need the proceeds of the sale of your home to supplement future health care. Either way, if you sell your house and use the funds to supplement monthly costs now - if you live longer than those funds last, you will still be facing a financial downside. Downsizing is a good option for younger retirees needing to change their financial options as the investment you make can be sold later when your housing/health needs change. For some, an RM is a very good tool - just remember that there are a variety of RM products and "deals" available - get help if needed to choose the right one.
I know what you mean - there was a lot of good information offered. I tried to take the pro side because (a) I have an RM which is working very well for my needs; and (b) because a lot of those considering an RM don't have the funds to continue making payments on a standard mortgage. As to the original poster of the question - unless those who post manage their site preferences to allow notice of responses, they may not know it was answered. I sort of had to figure that out - because I had posted another question previously and couldn't figure out how to access any response. I struggle to keep up with technology - and am wary of agreeing to be noticed by email of responses because hot topics can turn into a lot of emails.
By proceeding, I agree that I understand the following disclosures:
I. How We Work in Washington.
Based on your preferences, we provide you with information about one or more of our contracted senior living providers ("Participating Communities") and provide your Senior Living Care Information to Participating Communities. The Participating Communities may contact you directly regarding their services.
APFM does not endorse or recommend any provider. It is your sole responsibility to select the appropriate care for yourself or your loved one. We work with both you and the Participating Communities in your search. We do not permit our Advisors to have an ownership interest in Participating Communities.
II. How We Are Paid.
We do not charge you any fee – we are paid by the Participating Communities. Some Participating Communities pay us a percentage of the first month's standard rate for the rent and care services you select. We invoice these fees after the senior moves in.
III. When We Tour.
APFM tours certain Participating Communities in Washington (typically more in metropolitan areas than in rural areas.) During the 12 month period prior to December 31, 2017, we toured 86.2% of Participating Communities with capacity for 20 or more residents.
IV. No Obligation or Commitment.
You have no obligation to use or to continue to use our services. Because you pay no fee to us, you will never need to ask for a refund.
V. Complaints.
Please contact our Family Feedback Line at (866) 584-7340 or ConsumerFeedback@aplaceformom.com to report any complaint. Consumers have many avenues to address a dispute with any referral service company, including the right to file a complaint with the Attorney General's office at: Consumer Protection Division, 800 5th Avenue, Ste. 2000, Seattle, 98104 or 800-551-4636.
VI. No Waiver of Your Rights.
APFM does not (and may not) require or even ask consumers seeking senior housing or care services in Washington State to sign waivers of liability for losses of personal property or injury or to sign waivers of any rights established under law.
I agree that:
A.
I authorize A Place For Mom ("APFM") to collect certain personal and contact detail information, as well as relevant health care information about me or from me about the senior family member or relative I am assisting ("Senior Living Care Information").
B.
APFM may provide information to me electronically. My electronic signature on agreements and documents has the same effect as if I signed them in ink.
C.
APFM may send all communications to me electronically via e-mail or by access to an APFM web site.
D.
If I want a paper copy, I can print a copy of the Disclosures or download the Disclosures for my records.
E.
This E-Sign Acknowledgement and Authorization applies to these Disclosures and all future Disclosures related to APFM's services, unless I revoke my authorization. You may revoke this authorization in writing at any time (except where we have already disclosed information before receiving your revocation.) This authorization will expire after one year.
F.
You consent to APFM's reaching out to you using a phone system than can auto-dial numbers (we miss rotary phones, too!), but this consent is not required to use our service.
An 80 yr old will be off the charts for 20 or 30 yr traditional mortgage; so they will either not qualify at all OR will have to do a huge deposit with maybe 5 or 10 yr mortgage through a speciality lender. Condos builds in retirement areas do these often.
But RMs are not traditional mortgage in the usual sense with the individual borrower qualifying for the loan to buy a house, but it’s more the existing property is borrowing the $. The RM amount is based on the property value not the credibility of the owner. JessieBelle was spot on in that it’s maybe 50% of the value of a fully paid off home that will be the RM max.
RMs seem to be often just a band aid on a much bigger financial & health problems for an aging elder.
Have you considered selling the house and downsizing to an apartment. It may make the most economic sense. Let us know a little more about why you would like a RM. They are okay if you want to stay in your home, have no heirs to worry about the house, and don't have to enter a nursing home or apply for Medicaid. You have to be very careful with them. Many people get into them, then wish they hadn't. Very few companies even offer them anymore, they can cause such problems.
Not to be nosy, but may I ask why you're considering an RM? Are you aware of how financially dangerous they can be, such as the fact that they're negatively amortized?
These are serious and in my opinion not safe debts to incur.
Often if the elder owns a home and has for years or decades, they more than likely have a very low priced homeowners policy based on 1970s, 1980’s.
The new RM (like all mortgages) will require updated full coverage insurance & if your area has other perils - like flood, earthquake or windstorm - you will need to have these coverages in addition to the general homeowners policy. It can be very very expensive..... where I am in the New Orleans area folks can need homeowners, flood AND windstorm and it’s not usual to hear of 5-10k annual insurance costs. Insurance payment is the property owners responsibility.
I wonder if the OP is still even visiting the forums, or will return to see the answers.
but you don't have to make monthly payments. Instead, the interest and MIP increases monthly as a percentage of what you borrowed and that total becomes due when you sell or move from the home. Ostensibly, the value of the home at that time will repay the loan; if not, the mortgage insurance will kick in the balance. In my opinion, the REAL consideration of whether or not to use an RM is whether you might l need the proceeds of the sale of your home to supplement future health care. Either way, if you sell your house and use the funds to supplement monthly costs now - if you live longer than those funds last, you will still be facing a financial downside. Downsizing is a good option for younger retirees needing to change their financial options as the investment you make can be sold later when your housing/health needs change. For some, an RM is a very good tool - just remember that there are a variety of RM products and "deals" available - get help if needed to choose the right one.