• Question
  • Not enough equity for reverse mortgage - what else can help me?

    Asked by a 70 year old from Philadelphia, PA on 10/21/2012

    I will turn 62 in January 2013 and looking to retire in 2014. I am not looking for a line of credit in a reverse mortgage but looking to stop my mortgage payments. I am looking to save the money used for current mortgage payments and use to move in 2015 or 2016. Would I qualify for any program - I currently have a high non-fixed interest rate. I refinanced in 2005 and have little to no equity to date. Are there Ny programs that can help me?

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  • Categories: Mortgage Refinancing, Reverse Mortgages, Housing

Answers

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    NewRetirement

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  • You are right, it does not sound like you will qualify for a Reverse Mortgage. Have you looked into refinancing options. Refinancing should significantly reduce -- though not eliminate -- your mortgage payments. Interest rates are at an all time low right now. You should probably try to lock in a low fixed interest rate on your home.

    To qualify for refinancing lenders look at a variety of criteria:

    1) Lenders will consider your income and how much you owe. Lending Tree reports that lenders typically look for a debt to income ratio (DTI) that is no more than 38 percent. This means that no more than 38 percent of your income goes to paying off debt.

    It would be in your best interest to refinance before you retire so that your income can still count for your DTI.

    2) Another factor is your loan to value (LTV) ratio. A loan to value ratio can be calculated by dividing the amount you owe by the current value of your home. Most lenders will qualify you for a mortgage refinance if your loan to value ratio is less than 80 percent. (As a contrast, to qualify for a Reverse Mortgage you usually need a LTV ratio of around 50 percent.)

    If your LTV ratio is higher than 80 percent, then there may be government programs to help you refinance:

    -- The Obama Administration introduced the Making Home Affordable Program (HARP).
    http://www.makinghomeaffordable.gov/pages/default.aspx

    -- Or, if your current mortgage is a FHA mortgage, then you could qualify for the FHA to FHA Streamline refinancing.
    http://www.fha.com/fha_article.cfm?id=27

    3) Your credit score will be another important factor.

    In addition to refinancing, it sounds like you should perhaps delay your retirement. There are three key benefits to delaying retirement. You can: 1) Dramatically increase your monthly Social Security benefits for retirement. 2) Contribute more money to your retirement savings accounts. 3) Reduce the period of time in retirement when you are relying on those savings. Seventy four percent of all households who retire at age 62 fall short of having adequate assets for retirement. Delaying retirement to age 67 dramatically reduces this figure to 47 percent.

    We wish you a secure retirement!
    http://www.NewRetirement.com

  • Login to rate this answer:   Answered on 10/25/2012
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.