Reverse mortgages?


W

Winter

I understand the concept of a reverse mortgage but am trying to
understand who the players are and how these transactions are set in
motion. Whose turf are these transactions on- licensed financial
services reps or real estate agents? What do commissions etc look like
and who gets them? How are they marketed and by whom etc.

Thank you,

Winter
 
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B

BMS

Mortgage providers and it is regulated by HUD. Most mortgage providers
avoid them because of the regulations.
 
C

Cal Lester

BMS said:
Mortgage providers and it is regulated by HUD. Most mortgage
providers avoid them because of the regulations.
HOWEVER, they are an EXCELLENT tool for people who do NOT
have a desire to "pass on the property" to thier heirs. It gives senior
citizens the opportunity to have a "Life Estate" in thier home, "payment free",
until BOTH Die or Move (simplified explanation.)
Cal Lester CLU
 
B

BMS

To your point. In this day of Medicaid recovery, it is the only plan that
protects the home for the non-institutionalized spouse in many states.
 
R

rajiv1

Could someone explain what exactly reverse mortgages are and how they
work?
 
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C

Cal Lester

BMS said:
As the name implies, it is the reverse of a conventional mortgage. If
you're over 62, you can draw out the equity in either a lump sum or
monthly.
It is a little more than that. It is a Federaly sponsored program, wherein
a person who qualifies applies for a NEW mortgage (usualy about 80%
of the CURRENT value of the property), the mortgage conmpany pay's off
the existing mortgage (if any), and the owner & spouse then have a GUARRANTEED
home for the balance of EITHER life, and make NO MORTGAGE PAYMENTS as
long as they live in the house. At the DEATH of the second to die or if they
decide to move OUT of the house (or to a nursing home or such), then either
the heirs or the mortgage company sells the property to satisfy the then
current mortgage. If there is a profit it goes to the heirs. If the property sells
for LESS than the current mortgage, there is NO PENALTY OR FEE TO PAY.

It amounts to what is called "A Life Estate"

When a person has a "life estate" in a piece of property (most commonly, a house and the contents
within it), he/she enjoys almost the same rights in that property as would an "absolute" owner - but
only for his/her life.

Cal Lester CLU
 
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W

Winter

Cal,

I would like to understand this a little better.

Let me give an example to see how it plays out.

Say a couple owns a home appraisd at $300,000. They are both 70.
They have an existing mortgage and the unpaid balance is say $50,000.

So the reverse mortgage lender will lend 80% of the $300,000 or
$240,000. Out of the $240,000, $50,000 goes to pay off the existing
mortgage and the remaining $190,000 goes to the couple as cash direct
to them. Is this correct?

How is interest payment to the lender handled? Does that accrue and
deducted from the proceeds at the time of sale or how does that work?

Also, what is the status of reverse mortgages these days. How
widespread is it. If a person wants a reverse mortgage do they just go
to their local bank and get a dumb look back or do you go to a HUD
approved agency etc. How does that work? Where is it all happening.

Thank you,

Winter
 

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