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Home Our Columnists

Finding Common Ground With The Reverse Mortgage

Lynette Jorden by Lynette Jorden
June 15, 2018
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Reverse Mortgage

Reverse Mortgage

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As consumers contemplate their retirement and financial future, they usually must consider a balance between the money they have and the money they will need. In searching for balance, a reverse mortgage often becomes part of the conversation. With so many sources of information available to consumers, it can be particularly hard to imagine how a reverse mortgage might work for them, and hearing stories of others’ experiences can be of help in finding that commonality.

Let’s look at two families below and how the reverse mortgage provided a solution.

CASE #1

Claudette, 72, was working with her real estate agent Tracie trying to find an acceptable house to downsize into after her husband’s passing. She could no longer manage the upkeep of her home and the mortgage payment was too much. As Tracie searched through the inventory of homes in Claudette’s desired area, it became clear that she would not have enough equity from the sale of her current home to make a cash purchase on a new home. During this process, Tracie attended a reverse mortgage continuing education class hosted by her broker. During this class, Tracie learned more about the product and Claudette came to mind; could this be the solution that could get her into a home that she could afford without compromising the location and quality that she was looking for?

Claudette was encouraged to meet with the local reverse mortgage specialist – also known as a Home Equity Conversion Mortgage (HECM) specialist – who could help her understand how the product worked. She was a bit skeptical and had many questions as she had learned more and more. As she worked through her specific scenario and all the misnomers were answered, it became clear to her that this was her solution.

Tracie was able to find a property within walking distance of Claudette’s friend, which was very important to her. Financially this was the best option Claudette could have imagined. The house she agreed to purchase was priced at $217,900. She was approved for a loan in the amount of $92,900 and brought in the remaining funds of $125,000 to complete the purchase. This enabled her to save $35,000 from the sale of her property and she would not have another mortgage payment on her new home as long as she remained in the home as her primary residence and all other terms of the loan continued to be met.

CASE #2

Bill and Joan had a home that was free and clear of a mortgage. They had enough income to support them through their retirement years, however, like many people, some unexpected expenses came up that changed that. They had a daughter that became disabled and they needed additional money to support her. After attending a class on the reverse mortgage at their local community adult learning center, they scheduled an appointment with the reverse mortgage specialist and completed their required counseling class before continuing on with the application and process of obtaining a reverse refinance on their home.

Bill and Joan were approved for a loan amount of $196,000. Of this amount, they decided to have $20,000 distributed to them at closing to purchase a vehicle. Next, they set up a term payment of $1,000 a month so that for a period of 12 years (the term and dollar amount they selected) they would receive that directly into their bank account. This left them with a line of credit in the amount of $32,000. They were able to now have safe and secure transportation, and the additional monies needed to help care for their daughter.

From these scenarios, one can see how a reverse mortgage may be a great solution for different people at different stages of their lives and for a variety of reasons.

Lynette Jorden

Lynette Jorden

Lynette Jorden is a loan originator with V.I.P. Mortgage Inc. For more information, contact her at (480) 209-9524 or ljorden@vipmtginc.com.

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