How does a senior go from being threatened with foreclosure to a keeping their home and possibly putting cash in their pocket? The best way may be by using a reverse mortgage, according to Bob Tranchell, a Relationship Manager with Financial Freedom. "A reverse mortgage can be used to help a senior get out of foreclosure saving their home and in some instances giving them money to live on."
Here is an example scenario:
Mr. "Customer" had a home worth $433,000. He had taken out an adjustable mortgage during the refinance boom, but after the adjustable provisions matured/adjusted, he was no longer able to make the payments. In danger of foreclosure, he reached out to his mortgage company, and through a lawyer, he negotiated a payoff of the original adjustable loan at $239,000. In order to get the funds to retire the original mortgage, he took out a fixed rate, reverse mortgage at X.xx%. He paid off the original adjustable mortgage and even had cash left over. The amount available to him through the reverse mortgage actually gave him more cash than he needed to pay off the original mortgage so he received cash at closing. Those "extra" funds were useable as he saw fit.
While many lenders will only negotiate a "net zero" pay off which will not allow a senior to receive any extra money, some are willing to allow it. Either way, a reverse mortgage may be one of the best options when seniors fall behind and get into trouble with their existing mortgage. If they are in danger of losing the house to foreclosure, and they can work out a reverse mortgage solution, they can then stay in the home indefinitely.
A reverse mortgage is also a "non-recourse loan" so neither the senior nor the heirs will owe more than the market value of the home when deeded ownership changes. There are no credit or income requirements with a reverse mortgage. The loan amount is determined by the age of the borrower(s), the value of the home, and current interest rates. There are no payments due to the mortgage company until the senior leaves the home or passes away.
If you have questions about reverse mortgages you can email reindex @reindex.com with your questions, put Reverse Mortgage Question in the subject line.June 19, 2009
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