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Are reverse mortgages safe?

When you take out a reverse mortgage, you remain the owner of the home just as in any traditional mortgage. So, you are still liable to pay the property taxes, homeowner insurance and making home repairs. In case you fail to pay them off, the lender may demand repayment of the loan.

Is there any chance of default?

Reverse mortgages are quite safe as there's no chance of default because you aren't making monthly payments. And the loan needs to be paid off by your heirs when you die. This can be done by selling or refinancing the home. But the home value has to exceed what you owe. Otherwise, the heirs can simply pay off the debt and retain the home.

Can the lender claim more than property value?

Moreover, when the lender sells off property in order to get back the money he has invested, any extra proceeds exceeding the home value is handed over to the borrower or his heirs. However, it may happen that the sale proceeds aren't enough to satisfy the debt. In such a case, the lender cannot claim more than what the property is valued at the time of its sale. This is because reverse mortgage is a non-recourse loan. So, the lender may not come after your income and assets or ask you heirs to pay off the remaining balance.

Thus, reverse mortgages are quite safe as there are no chances of default and the lender won't come after you and claim more than the value of your property.

Related Articles:

Reverse Mortgages - How seniors tap equity for extra cash


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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

what is reverse mortgage and why it is good?

Like | Dislike | Share | Posted: Thu, 02/04/2016 - 23:49 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Arnold,

A reverse mortgage is a home loan that does not require to be repaid as long as a consumer occupies the property. As in the case of other mortgages it does not require monthly payments and enables to convert the home equity into cash.

Here, the interest rate is not really important to the people taking a reverse mortgage since they won't be paying off the loan. That's because a reverse mortgage, as its name implies, lets homeowners who are aged 62 or older take equity out of their houses without having to sell their property or repay the money.

With most mortgages, the focus is on the interest rate whereas with a reverse mortgage, the focus is on the value of the house. Reverse mortgages can give seniors the financial ability to lead an easier and comfortable life.

[b:1d6a430674]The main benefits of a reverse mortgage are -[/b:1d6a430674]
[list=1:1d6a430674][*:1d6a430674]A borrower does not require an income to qualify for reverse mortgage. His credit history is also not verified before approving the loan. Here the amount of loan is dependant on his age, the value of the property, interest rates and closing costs of home loans in the neighborhood of the borrower.

[*:1d6a430674]As long as the borrower or any co-owner occupies the property, there is no need of any repayment.

[*:1d6a430674]A borrower needs to pay off his pending debts before he can avail a reverse mortgage. But there are lenders including the state or local government agencies who may allow him to repay the previous mortgage after he pays off the reverse mortgage when required.

[*:1d6a430674]The amount received as reverse mortgage loan is not considered as income and hence the Internal Revenue Service does not charge any taxes on it.[/list:o:1d6a430674]Hope this information will help you.

Regards,
Blue

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have provided my grandmother approx. 52K over the past 14 years as a reverse mortgage. I currently have a lien against her house for said amount. My grandmother recently passed away and I am not the executor of her will. My Uncle is trying to sign the house over to his son, who has no financial claim to the property. Can he do this? Can a title be transferred while a lien is in place?

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Anony,

Welcome to MortgageFit Forums.

I understand your confusion and the complicated nature of the problem. As for your uncle is concerned, he can't do this if the lien is properly documented.

As per the State laws a lien existing against a property must be paid off before the title of the property can be sold or transferred. I shall suggest you to consult an attorney with your papers.

Feel free to ask if you have any more doubts.

God bless you.

For MortgageFit,
Samantha

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What happens to the house after the borrower dies ?

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Jessica's picture
Jessica | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

The house will remain with the heirs of the borrower provided the reverse mortgage loan has been paid off. If the loan is not repaid, the lender will take over the ownership rights.

Regards,

Jessica.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i am interested in availing. but no nationalised banks except PNB IS IMPLEMENTING IT.EVEN THIS BANK PROVIDES ONLY MONTHLY PENSION . THEREIS A PROVISION FOR LUMPSUM PAMENT FOR VARIOUS PURPOSES AS APPERD IN TIMES OF INDIA ON 16-06 2007 .HAVE THESE MODIFICTIONS BEEN COMMUNICATED/WHEN WILL OTHE BANS TAKE UP THIS SCHEME

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

The ICICI bank is studying the market currently and will launch reverse mortgage very soon. By June, 2007 the Bank of Baroda had intially planned to introduce the product within next 3 months, that is in September.

You can just contact the bank officials or the customer care department to know more about this.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can my mother avail these loan on "Tenant Agreement"? Because these agreement has been made between "Owner-Developer-Tenant(Occupier)". This agreement are under court consent. Why developer is not preparing "Sale Agreement"

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

No, your mother has to be the owner and the property should be her primary residence. Properties with tenant agreement will perhaps not qualify. Check out with your local bank.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I've been living with my father in law for 8-9 years. He took out a reverse mortgage and recently was sent to jail. What happen to the house and how could I gain owneship?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi CBo

A query similar to your has been answered in the following link:
http://www.mortgagefit.com/reverse/gain-ownership.html

Please take a look at it. I hope it will help you.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

my parent had reverse mortage and he passed away he had borrowed 161,000. the appraisal said the home is worth 230,000. does the heirs get the rest of the equity that is in the home?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hey nanafana,

I guess, you are selling off the property in order to pay off the reverse mortgage dues. Yes, after the reverse mortgage is paid off, the heirs to the property will get the rest of the equity from the property.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

we took a reverse mortgage and our home was appraised at about $109,000. We had a line of credit for $60,000. There is about $1500 left in the line of credit. We badly need a new roof and $1500 will not cover it. Can we get anymore on our reverse mortgage?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi

I don't think it would be possible for you to get anymore on the reverse mortgage. But you can surely talk with the lender regarding this and see whether they can help you with this in any way.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>What happens to the house after the borrower dies ?

Somebody will inherit the house, usually the children. If they want to keep the house, they'll need to pay back the Reverse Mortgage lender. If they don't want to keep it, they'll let the Lender foreclose on it.

If they want to keep it, they have 3 choices:

1. [url=http://www.mortgagefit.com/refinance.html]Refinance[/url] the Reverse Mortgage with a Forward Mortgage.
2. Refinance the Reverse Mortgage with another Reverse Mortgage
3. Pay the Reverse Mortgage lender with cash

A lot of my clients get a life insurance policy when they get their Reverse Mortgage, to enable the heirs to pay back the Reverse Mortgage lender without having to refinance the property.

There is no real defined timeframe to pay back the lender, but they'd like it to happen as soon as possible. The lender understands the heirs need time to make a decision, and if they're going to sell the house, that takes time too. As long as the heirs are reasonable, the lender will be reasonable too.

A girlfriends Dad passed and he had a Reverse Mortgage, and her sister was managing the Estate and she shouldn't have been in charge because she was really disorganized. After 12 months the Lender told her they would start foreclosure proceedings if she didn't get serious and aggressive about selling the house.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>Can we get anymore on our reverse mortgage?

Anybody can refinance their existing Reverse Mortgage with another Reverse Mortgage, and pull out additional cash. However, the refinance works exactly like a traditional refinance and only makes sense if the home has increased in value.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>I've been living with my father in law for 8-9 years. He took out a reverse mortgage and recently was sent to jail. What happen to the house and how could I gain owneship?

The loan will become due and payable after he completes his 12th month in jail. You can purchase it from him, pay off the Reverse Mortgage and keep the house.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My mother-in-law is considering getting a reverse mortgage. She doesn't bring in enough money per month to make it and needs a new car (her's is 20 Years old). She has a life insurance policy. My husband and I are not concerned with keeping the house after her death. We want her to live comfortably without any worry, but don't want the financial burden of paying the house off. Can we just let the lender take possession of the house at that time, or will we have to apply her life insurance money toward the house?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Your mother-in-law does not need to make any monthly payments for the reverse mortgage. She'll not be required to pay it off, unless she vacates the property or sells it to someone else. After her death the mortgage company will take over the possession of the property and sell it off to recover the loan amount. So, you'll not have to bear the burden of repaying the mortgage.

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brown.walter.09's picture
brown.walter.09 | Joined: August 10, 2009 09:32 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Reverse Mortgages are very safe. You own your home. The Deed stays in your name and in YOUR possession. FHA guarantee the payments that are made to you. They also guarantee you can stay in your home as long as you like, and you will never owe more than your house is worth.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

how can i be absolutely sure i'm not dealing with a scam or swindled by a underhanded company?????

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

zoomzoom, you need to have an attorney on your side, for one thing. but dealing with a long-term, well-recognized banking name ought to suffice. don't do business with "Loans by Joe" or "I Have Money For You Mortgage Company" - that goes without saying. check with your friends, family, etc. to see who they consider to be a reputable company, seek the advice of your Pastor, your lawyer, your insurance agent, etc.

You're bound to find out that not everything in this life is a scam. yes, there are plenty, but if you ask the right questions and align yourself with the right people, you'll be fine.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>how can i be absolutely sure i'm not dealing with a scam or swindled by a underhanded company?

By getting it through a hugh well respected financial institution. Immediately I think of Bank of America and Wells Fargo. Neither of them can afford to have their name tarnished and are extremely compliant with every aspect of the Reverse Mortgage process.

I started working for the Reverse Mortgage division of Bank of America on Monday, and I'm amazed at how strict they are compared to the "Broker" side of the Reverse Mortgage business. You can't go wrong selecting either of those two companies, and I suggest getting quotes from both of them, comparing them, and going with the company you feel the most comfortable with.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

can
the borrower pay off the mortgage before he dies, say within two to three years after the initial start of the reverese mortgage ?

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

that's certainly an option bubba, but i wonder about the value of doing so...unless there's an expected windfall coming in a couple of years and the reason for a reverse mortgage now is simply to take care of shorter-term needs.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>can the borrower pay off the mortgage before he dies, say within two to three years after the initial start of the reverese mortgage?

Yes, and without any prepayment penalties. If it's an open end program (one with an adjustable interest rate) I suggest paying all of it except $1.00. That'll leave the Reverse Mortgage open, in case you want to access the equity again in the future. That way you won't have to pay the loan fees again if you want to get another Reverse Mortgage in the future. If it's a closed end program you don't have that option - you'd have to pay if off entirely.

If you know you're only going to be in it 2-3 years, there are much better options, because the fees are high when a Reverse Mortgage is originated. However, if you've already been in it 2-3 years, and then received an inheritance, or something similiar, it may make sense to pay it off (or down to the last dollar).

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

great suggestion, raymond, to pay it down to a dollar if the loan is a line of credit. it's something i hadn't thought about, and probably many others as well. thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have a reverse mortgage. The LTV is 80%. I contacted the lender recently to request a $10,000 advance, and was denied, because I did not have enough equity. I thought my equity was for use to pay high interest credit card, get a roof, etc. Why was I denied?

Also, a friend called me recently and told me a friend of theirs was losing their home because the value of the house became less than what was owed. Can that happen? She said to beware--I could lose my home.

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Missy!

Welcome to forums!

You will get a reverse loan based on the equity that you have in the property. You can use that equity to pay off your credit cards, go for home improvements. etc. You should speak to your lender and clarify as to why you were denied of reverse loan.

If your property is underwater and if you are unable to pay off your dues, then the lender has the rights to foreclose the property. Thus, you would lose your home.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Does AXIS BANK in India operates on with RM ? Do they Give Lump Sum amount ? If So, what is the Max % against the Total assessed current value of the house? If axis Bank does not have any such RM scheme, what are the other Banks who operate with the RM schemes?
Also, does the owner of the house can sell his property before his death and pay back the Mortgage amount to the lender and the remaining ( the difference between the actual sale vaule and the RM amount ) proceeds of the house sold coud then remain with the Owner. Is there any minimum time oeriod that the owmner has to wait before trying to sell his house and pay off the RM loan amount?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

You need to contact the Axis Bank, India in order to get information in this regard.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

IF I GET A REVERSE MORGAGE ON MY HOME, AND DECIDE MAYBE 5 YEARS DOWN THE ROAD I WANT TO SELL. ARE THEY ANY INTEREST,THAT I HAVE TO PAY ON TOP OF THE VALUE ,OR MONIES I RECEIVED FOR MY HOME?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

You'll have to pay off the money that you've received as reverse mortgage.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My grandmother is in a nursing home and has been there for 5-6 years and is on masshealth/medcaid. My grandmother has a life estate in her house and my aunt lives in the house and wants to do a reverse mortgage. Will my grandmother lose her insurance due to my aunt doing a reverse mortgage?

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Your scenario is comprehensive and you really need to review that question with an Estate Planning Attorney to ensure the process is done properly, so you Grandmother doesn't lose her Medicare benefits.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

my husband and i have a rm. i do not want to stay in house after he dies. can i just let the bank have it?

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>can i just let the bank have it?

Yes, but that'd be a poor financial decision if there is equity left in the house at that time. In that scenario, it'd be better for you to sell the house yourself, pay back the Reverse Mortgage, and keep the rest of the money for yourself.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Absolutely right...I think it would be downright foolish to simply walk away from a property that might have sufficient equity in it to provide some real "walking away" money.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I was a live in healthcare provider who in lieu of opart of my salary received room. And board.I was told by the family that after their grandparents passed I could stay here as long as I wanted to. I just found out that there is a reverse mortgage on the house. Hiw long do I legally have before I have to move? I also paid bills.[left:cc4acf7e71][b:cc4acf7e71][/b:cc4acf7e71][font=Impact:cc4acf7e71][/font:cc4acf7e71][/left:cc4acf7e71]

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

If the heirs [url=http://www.mortgagefit.com/refinance.html]refinance[/url] the mortgage, then they will become liable for the dues and you'll be able to stay in the property as long as you feel like. However, if the heirs do not refinance the loan within 3 months, the lender will sell it off and you'll have to leave the property.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I disagree with that, Niicss. In my experience, I have found that lenders will work with the heirs of a deceased borrower until a solution is found. They generally give everyone a year to obtain a new loan or sell the home, but they're also a bit realistic and realize that it may take longer, so they'll often extend that timeframe.

Sajada, don't get discouraged here - keep working with the family and let them know what you've found out here.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can I obtain a reverse mortgage on my coop apartment. I live in Seattle, I
own the apartment free and clear. The apartment is worth about $300K, how much could I get a month using reverse mortgage (approx)?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Guest,

You will have to contact the local reverse mortgage lenders and check out if they can help you with a reverse mortgage. However, not all lenders will be ready to give you a reverse mortgage on coop.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Could our current reverse mortgage be paid off by another mortgage co. with my husband being added on to the title with with me on the new reverse mortgage..

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi RES,

Yes, you will be able to pay off the existing reverse mortgage with a new reverse mortgage. If your husband is 62 years of age, then you can add him to the property deed and both of you can jointly apply for a reverse mortgage.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>Could our current reverse mortgage be paid off by another mortgage co. with my husband being added on to the title with with me on the new reverse mortgage.

Yes. And the FHA insurance premium will be prorated, resulting in reduced costs. And You shouldn't have to pay an Origination Fee or Monthly Service fee either. And some Reverse Mortgage Loan Officers, including me, will also pay all your non-recurring third party costs.

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rutchell.db's picture
rutchell.db | Joined: January 24, 2011 08:51 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

The lender making monthly payments to the homeowners sounds like a free loan. But the catch is they'll get the money out of your estate after you die, leave your home or sell.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

It's not a "catch" at all. This is the entire idea behind reverse mortgages; that a homeowner of retirement or near-retirement age can use equity that has built up in a home to help supplement other sources of income such as pension or SS. As there are no repayments during the course of a borrower's lifetime for this sort of loan, it's only natural to expect that payback would come upon sale and/or death of the homeowner(s).

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