“You get some money and the bank gets your home.”
When I started in this business, that statement was the most common misconception about a Reverse Mortgage. Now most of the curious have learned the truth, the bank only gets what is owed. (The Loan Balance)
If your loan balance is less than the value of your home when you’re gone, your estate decides what to do with your home. The estate can pay off your loan, or sell your home and distribute the equity. (According to your wishes)
About five years ago I got a call from a single lady who was interested in doing a Reverse Mortgage on her Condominium.
“Hi, this is Mark.”
“Hi Mark, my name is _____, you did a Reverse Mortgage with my friend________. Now, I’m interested in a Reverse Mortgage.”
We talked about things for a while, she had done some serious homework and was rather well informed about the details of the HECM (the FHA home equity conversion mortgage) program.
I asked her, “What do you plan on doing with your home when, you know when…”
“You mean when I die?”
“Yes, that’s what I was trying to say.”
“Well, since I don’t have any family, and the bank will take my home when I’m gone, I’m not concerned about that right now.”
“Interesting, is that what you think will happen?” I said.
“Well yes, I’ll die one day, till then I plan on living here.”
“No, what I mean is, do you think the bank will take you home when you’re gone?”
“Yes, isn’t that how a Reverse Mortgage works?”
“No, the bank doesn’t take your home. And it looks like your equity will likely grow faster than the interest. You’re gonna need to work on your estate plan for this property a bit more.”
“Gladly!” She exclaimed!
The Details Of Her Reverse Mortgage
-Her homes value was around $245,000, she had a mortgage of around $90,000.
-Her principal limit (money available in her Reverse Mortgage) was around $143,000.
-We paid off her existing mortgage, ($90,000) her loan costs were around $7,500.
-Her loan balance was about $97,500, leaving her with a credit line of about $45,500.
The Update On Her Home & Life
About a year after we closed her HECM we were talking and she said, “I wouldn’t be in my home today without a Reverse.”
She called me in late 2023 and said, “How are things looking for a refinance? I could really use some more line of credit money.”
I looked over her numbers and called back, “We’re not quite there yet, but let’s keep this on the back burner.”
We will refinance her when her value goes up about $40,000 and the interest rate goes down about 1%.
Over the years I have refinanced about 70% of the Reverse Mortgages I’ve originated. She is one of the reasons why I do Reverse Mortgages.
A Real Reverse Mortgage Story.
Thanks for stopping, looking & listening
Mark Schmidt
