Helpful information for seniors who are considering a reverse mortgage who already have a first or second mortgage on the home.
Description of a reverse mortgage is converting the equity in your home into a mortgage which you don’t have to pay back until you either: pass away, permanently move or sell. Can you still obtain a reverse mortgage if you currently have a first or second mortgage on the home? Yes, provided:
First or Second Mortgage:
The Federal Housing Administration (FHA) requires that if there is currently a first or second mortgage on the home, it can be no more than 65% of the home’s value. These mortgages can be completely paid off with the proceeds of the reverse mortgage provided there is enough equity to pay the mortgage(s) off at closing. If you do not have enough equity in the home to pay off the mortgage(s) you will not qualify. The homeowner can opt to buy down the debt if they have the money to do this in order to qualify, but in most cases, the homeowner is not financially able to do this.
Home Equity:
Of course, the greater the equity the greater the mortgage and the lower the equity the lower the mortgage will be. Fortunately, most seniors own their homes free and clear of mortgages but for the one third who don’t will find they will not qualify.
Currently, under the Obama Stimulus Program the home’s value limits have been raised from $417,000.00 to $625,500.00 through December 31, 2010. Since the housing values have been decreasing, seniors interested in reverse mortgages will find their equity has diminished. The Obama Administration is trying to hold the housing values steady so that seniors will not be too hurt by this economic downturn. Speak to a financial advisor.
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