Today There are Four Types Of Reverse Mortgage:
1.
HECM FHA
Purchase or refinance
Governed by HUD
Property needs to meet health and safety
codes
Over 62 years old both on title
Can vest in Living Trust
1-
4 units and condo
2. Jumbo HECM
Limited States
Up to $7,000,000.
Over 62 years old both on title
NO PMI of 1.75 –
Higher rate higher FICO needed 680
3. Community
and City Reverse Programs
4. Shared Equity
Programs
We
are going to talk about using a Reverse as a purchase and as a refinance with
#1 and #2
Although
I’m licensed in twenty states talking about
#3
is best if you call me or I can refer you to someone in Georgia or Massachusetts
where I’m not licensed.
#4
There are about twenty different lenders for shared equity programs. Some target
seniors, some do not
Rules
Take to
class
Owner
occupied property until you die.
Condo
to be FHA approved for #1 and case by case for the #2-4
1-4
for #1
1-2
for #2- 4
Large
down payment or equity
Not
be delinquent on a federal debt
Keep taxes,
insurance, and HOA current
The Loan amount is the lesser of:
- appraised value;
- the HECM FHA mortgage limit of $970,800;
or
- the sales price (only applicable
to HECM for Purchase)
- or be a Jumbo #2
Costs:
1.75% MIP mortgage insurance premium upfront
2% or $2500 of first $200000 + 1% after up to
$6000
The usual and state customary: Title,
escrow/attorney, recording, transfer, notary, appraisal, credit…
Income tax question:
Cash out refinance is not taxable.
Interest is not deductible until you pay it off
in one lump
Property taxes are deductible as they are paid
Recourse:
Is a non-recourse loan
Refinance dispersement options:
- Tenure - equal
monthly payments as long as at least one borrower lives and continues to
occupy the property as a principal residence
- Term - equal
monthly payments for a fixed period of months selected
- Line of Credit -
unscheduled payments or in installments, at times and in an amount of your
choosing until the line of credit is exhausted
- Modified Tenure -
combination of line of credit and scheduled monthly payments for as long
as you remain in the home
- Modified Term -
combination of line of credit plus monthly payments for a fixed period of
months selected by the borrower
For fixed
interest rate mortgages, a the Single Disbursement Lump Sum payment
Spouse:
Non borrowing spouse allowed
Joint Tenants
Or Living Trust
When borrowers pass:
Heirs have twelve months to settle and either
sell or refinance.
The 12 months can be extended if you complete a
form asking for total 24 months.
Sometimes no probate is necessary, depending on
the equity and cash in the estate.
Or go through probate process and get court
approval to sell.
Heir(s ) can apply elsewhere to refinance and
pay off the balance.
As
long as borrowers live in the house, they do not make a mortgage payment, but you
can make payments like a HELOC.
Borrowers
have to maintain property taxes, fire insurance, HOA and keep house “safe.”
