• Question
  • Reverse Mortgage with no Monthly Payout

    Asked by a 71 year old woman from Niceville, FL on 2/19/2013

    I own a home with an estimated value of $350,000. I have a $240,000 home equity loan on which I am paying interest only @ 3%, or about $625 a month. In another 14 months the lender wants $1000 per month in addition to the interest payment. I cannot pay this amount, since I am only collecting social security and a state pension. I have retirement funds and could pay down the mortgage to $215,000. I understand that at this loan to value ratio I could get a reverse mortgage. I do not want to get a monthly cash payment. I just want to not have to pay the interest payment any longer. I understand that the interest rate would be higher than 3%, perhaps 5% as a fixed rate. What would the initial fees be? Would the 5% interest just be added onto the $215,000 I owe? Are there other monthly fees? Obviously this will reduce my initial equity, but what if my home's price increases in the future. Will I still have the benefit of the increase in value, which would be an offset to the interest and the $215,000 that I owe? Is there any way I could get a reverse amortization table? FYI, I am planning on filing for bankruptcy based on other debts that I have, so do not recommend refinancing. Fortunately, in Florida, the equity in your primary residence is exempt from bankruptcy.

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  • Categories: Bankruptcy, Retirement Planning

Answers

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  • How much do you owe on the equity line? The full $240,000.00? Or a portion of that amount? I need to know that information in order to answer your questions.

  • Login to rate this answer:   Answered on 2/22/2013
  • NewRetirement User

    71 year old from Niceville, FL

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  • I owe $240,000, out of a total home equity line of $250,000. As I said in my original comment, I could pay this down to $215,000, and with an equity of $135,000 ($350,000-$115,000) I understand that I could qualify for a reverse mortgage.

  • Login to rate this answer:   Answered on 2/23/2013
**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.