Okay, so, we all know how a Regular Mortgage works. The borrower can be any age, they have to qualify with income and fico scores. Then after they close, they start making payments.
A Reverse Mortgage is a way for seniors age 62 or older to take a portion of equity out of their home. The proceeds are tax free and they do not have to make payments. The loans are FHA governed therefore there are many rules to protect the seniors and their homes.
A colleague of mine has decided that Reverse Mortgages are extremely more expensive than a traditional mortgage. They really aren't. If your client is purchasing a new home with a Reverse it's comparable to a Traditional Mortgage. Both have mortgage insurance, but in the case of a reverse, the insurance protects not only the lender but the borrower. For instance, if your client had gotten into a Reverse three years ago with an equity line, obviously the value isn't the same. However, because of the mortgage insurance, the line of credit would remain the same, not be lowered to the home value.
The only real difference is in the origination fee which is capped by FHA at $6,000. Yes, it's a bit more than a regular mortgage, but it provides a service for seniors who may not qualify due to income or fico scores. And let's face it, some seniors really need help, especially with the government cuts to their income and healthcare.
Really, if it's the best or the only solution for your client, wouldn't you want that for them? I would!
Serving the 210 Corridor - the cities of Monrovia, Duarte, Azusa, Glendora, San Dimas, La Verne, Claremont, Upland, Pomona, Chino, Chino Hills, Rancho Cucamonga and Fontana - wherever the need arises.
Linda K. Mayer, Realtor, SRES
License # 01767321
A Realtor you can Trust!
(626) 824-8927 Cell