Reverse Mortgages

Source of retirement income

You can now buy a home with a purchase reverse mortgage.  You can also use a reverse mortgage as a source of retirement income.  With the recent devaluation of the stock market many older San Diego homeowners will have to find a new way to supplement their retirement income.  For many, waiting until the market goes back up isn’t a workable answer.  For many of San Diego’s elderly who own North County homes, a reverse mortgage may offer a previously unconsidered source of wealth.  The reverse mortgage is a way of borrowing that transforms the equity in you North County home into liquid cash without having to to either move or take monthly payments.  This may just be what you need to help  pay bills through these hard times and to help you to be able to stay in your Ocean Hills Country Club homes or other North County Homes for over 55.

How much can you borrow with a reverse mortgage

Just like the name implies, a reverse mortgage is a loan against the equity in your North County home.  How much you can borrow is a percentage of the San Diego home’s value determined by appraisal and the age of the youngest homeowner.  This loan does not have to be repaid during the lifetime of the North County homeowner unless the homeowner decides to sell or to permanently move out of their San Diego North County home.  After the owner dies, his estate will have a grace period of one year to list and sell the North County real estate and pay the mortgage.  Any remaining equity will stay with the estate. If the estate wishes to keep the San Diego North County home, they can just pay off the reverse mortgage balance.  The estate would not be liable for any deficiency if the North County real estate sells below balance of the reverse mortgage.

San Diego homeowners may be elgible to receive up to $417,000 depending on the equity in their homes.  On some loans the limit may be increased to $625,000 in areas with high housing cost.  To estimate how much you may get for your North County home, use the AARP’s reverse mortgage loan calculator

Must be 62 years old

To be eligible for a HUD reverse mortgage, the Federal Housing Administration (FHA) requires the San Diego North county homeowners to be at least 62 years old.  There are no income or credit requirements to obtaining the reverse mortgage.  If you are married and own the home together, the reverse mortgage is usually based on the age of the younger spouse.  You are eligible even if you are still making payments on your home, but you must have at least 50% or more equity in your San Diego County home.  When the reverse mortgage is funded any remaining balance on their previous loan is immediately paid off.  Most types of San Diego North County real estate can be eligible for a reverse mortgage.  Even mobile North County homes built in the last 30 years where the homeowner owns the land can be considered.

Ways to receive funds from a reverse mortgage

The North County homeowner can receive funds from the reverse mortgage loan in several ways:  lump sum, equal monthly payments as long as you live in the home, or as a line of credit until the credit line is exhausted. You can also get money in any combination of the three.  The most popular choice of San Diego homeowners is the line of equity which lets you borrow how much and  when you need the money.  As long as at least one North County homeowner lives in the home you do not have to repay the loan.  Also, there are no out of pocket cost to obtaining the reverse mortgage.  Income from reverse mortages is non-taxable and does not affect your Medicare, Social Security, or pensions.

Downsides of reverse mortgages

Reverse mortgages are not without their downsides.  There are cost and risk involved.  As interest is added to the initial mortgage amount, a substantial portion of the equity may disappear in your San Diego home. The initial cost to obtain a reverse mortgage can also be high.  These include higher insurance premiums, title insurance cost, and the loan origination fee.  Cost can be financed by the loan itself, but that would reduce the money available to you.  Reverse mortgage payments also may affect your eligibility for some government benefits, including MediCal.  Generally, these payments are not counted as income as long as they are spent within the same month that they are received.  Nevertheless, the benefits to our aging senior North County homeowners may far out weigh the downside and provide some relief in this economic climate.   For more information on reverse mortgages contact Gary Harmon’s lending partner  Joyce Nathan, Home Services Lending.
This website does not give investing or tax advice, so be sure and discuss a reverse mortgage with your CPA.