Reverse Mortgage Concepts

This article illustrates how a reverse mortgage can be used over and over again to release cash from your home’s equity and create liquidity for life.

Reverse Mortgages, for some, are not a one time proposition. There are many reasons why most consumers think a reverse mortgage is a one time, one shot deal. They are advertised and sold as a lifetime loan with illustrations that amortize out to age 100 and they use terms like “no payments for life” and while this is all true, it does not necessarily mean the home owners will have or should have the same reverse mortgage for the rest of their lifetimes. It makes a lot of sense, when planning for retirement, not to have a mortgage payment to worry about, so most of my customers use the bulk of their proceeds from a reverse mortgage to pay off an existing mortgage on their home. This benefit could be enough for the reverse mortgage to make sense to some. The amount of the mortgage payment they were making no longer comes out of the bottom line every month, leaving them with extra spendable income. If they don’t spend the extra money, it adds up to thousands of dollars in savings every year. This is why reverse mortgages are becoming so widely accepted.

Others want more from the loan, like enough cash proceeds to live on for life. Many believe they will have to qualify for a large, cash benefit in order to have enough to live on for many years but this may not be necessary, at least not right away. There is a way to achieve both, in theory, let me explain.

I have been in the reverse mortgage business long enough now to have seen home values cycle both up and down twice. I have done the loan for as many customers in good times as I have for customers in not so good times. The difference can be significant. If you release cash from your home equity with a reverse mortgage when home values are sky high, you will probably get enough cash to live on for a very long time. The results will be little to no home equity when market values cycle back down but most reverse mortgage borrowers have resigned themselves to the fact that the money is worth more to them now, than the uncertainty of future equity. I know many current customers that wish they had done the reverse mortgage in 2006 at much higher appraised values. The truth is, however, even if you are considering a reverse mortgage in these times of lower appraised values, the program offers you a chance at recouping future equity in better market conditions through a future refinance of your reverse mortgage. If you qualify for the loan today and it will help you financially, do the loan now and get the relief you need. In the future, when home values go up again, you will be eligible for a reverse mortgage refinance. This would be the process of re applying for the loan at a later date, when you are older and the property will yield more money to you. The new reverse mortgage will pay off the old one, leaving you with only one loan but the new loan will be based on a higher home value and you will be older so you should get more cash proceeds to use for the future. Your loan balance will also increase because you have qualified to borrow more.

I have had the pleasure of refinancing some of my reverse mortgage customers. The combination of increasing property values and increasing age results in more money to live on, the second time around. It works very well if the first reverse mortgage is done at a time when property values are lower, so what are you waiting for? I’m sure, in the near future, I will have the opportunity to refinance some customers for the third time, when home values inevitably rise again. This is just smart financing and something you should know about.

One last thing, if this is your TV you might need to buy a new one.

Michael A. Manfredi is a Reverse Mortgage Specialist

(800) 507-2080

(602) 507-6527

(602) 456-0009

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