Need Advice On This One
I came across a lady who wants to get out of her home to move closer to her family. Her next home purchase depends on selling her current home. She has a reverse mortgage for 100,000 and her home was appraised at 165,000. She would like to at least payoff her reverse mortgage and move before November. Is this worth looking into? If so, any advice on how to approach this would be great.
Great response, NewKid. I agree.
[addsig]
Sorry, should have been more clear. She used the reverse mortgage proceeds to payoff existing mortgage of 100,000 to have no monthly payments on her home. The RM was done 8 months ago along with the appraisal
jhal,
You were perfectly clear. Maybe you did not understand what we are saying to you.
Even though this lady used the reverse mortgage to payoff her existing financing, the $100K she borrowed has become a new lien on her property. The benefit of a reverse mortgage is that the homeowner does not make any monthly mortgage payments, but this does not mean the property is free and clear.
A reverse mortgage is just a negative amortization loan. Each month that this lady lives in this house, she is being charged interest on her reverse mortgage loan. Because she makes no monthly payments, the interest charged each month is added to her loan balance. As a result of negative amotization, at the end of the first year of this loan, her loan balance will probably be $107K, even though she only borrowed $100K to begin with.
Since the lady will have to payoff this loan if she sells you her house, you need to know exactly how much money you will need to bring to the settlement table to purchase the property. Other than bringing your own cash and/or your own financing to the settlement table, there are no other viable approaches to consider.