Reverse mortgages can be a helpful resource for seniors who want to create a stable financial situation in their retirement years. Here’s another example of how a reverse mortgage benefitted two senior homeowners.
The situation:
- Bill (age 77) and JoAnn (age 75) own their Wisconsin home (worth $400,000), free and clear.
- As snowbirds, they’ve been spending their winters in Scottsdale, Arizona for several years; but now they want to relocate there full-time, so they can be closer to their children and grandchildren.
- Bill and JoAnn find a Scottsdale condo they love for $500,000. They will net $375,000 in proceeds from their Wisconsin home, but they don’t want to make mortgage payments on their new condo.
The solution:
- Bill and JoAnn use a reverse mortgage for purchase, putting down only $300,000 for their new condo.
The benefits:
- Bill and JoAnn can buy a more expensive home and preserve $75,000 in cash for re-investment and/or living expenses.
- Since monthly principal & interest payments are not required for a reverse mortgage, Bill and JoAnn have greater financial flexibility.
- They can live in the home for life, and the loan doesn’t have to be repaid until they sell the home, they move out, or both spouses pass away.
- Once the loan is repaid, any remaining equity goes to Bill and JoAnn or their beneficiaries.
- If the loan balance exceeds the property value, there is no debt obligation for Bill and JoAnn or their beneficiaries (the home can be sold for 95% of current fair market value).
At Waterstone Mortgage, we help seniors explore whether a reverse mortgage is ideal for their current circumstances and long-term goals. Because reverse mortgages are unique, we take the time to answer questions, address concerns, and help our potential clients strategize for the future.
Interested in learning more? Get in touch with a trusted Reverse Mortgage Specialist at Waterstone Mortgage. It’s our goal to help senior citizens create a more financially stable and secure retirement.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through a Federal Housing Administration (FHA)-approved lender. Not all reverse mortgages are FHA insured. When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. A lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and you are charged interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). There is no escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.
