Kentucky Reverse Mortgage’s - How do they work?
Let’s make the following assumptions:
- You and your husband are age 70
- Your home is owned free and clear and valued at $200,000
Under the FHA/HUD Program, the following would be available based upon the above assumptions and rates as of 02/05/2006:
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Cash Available
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$111,840
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Lump Sum Payment at Closing!
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OR
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Monthly Income
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$700
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Monthly Check as Long As You Live in Kentucky, in addition to Social Security and/or any other retirement income you might receive
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OR
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Line Of Credit
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$111,840
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Funds that are always available to you in check book form. Use it when you want up to the full amount.
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OR
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Any Combination of the above
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Take part of the Cash, have some placed in a monthly plan and the balance as a line of credit.
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The amount you borrower depends on you and your spouses age and the equity you have in your home. The older you are the more you can borrow. The more value in your Kentucky home, the more you can borrow. If you still owe money on your home, they will pay off the old mortgage and give you the balance, thus you will be able to borrow less.
Remember, unlike regular mortgages, bank home loans, home equity loans, and second mortgages, you do not make mortgage payments on a HUD Reverse Mortgage in Kentucky as long as you live in the home. NO PAYMENTS FOR AS LONG AS YOU LIVE IN THE HOME!
So how is the Lender repaid when you and/or you and your spouse have either moved and/or have passed away? Again there are several options:
- Let’s say you need to move either to your children’s home, another home you like or a nursing home. Sell the home, pay off the underlying mortgage and just like a regular home, the balance of the proceeds are yours.
- You or your husband passes away. Survivor continues living in the home until they decide to move or passes away.
- You and your husband have passed away. Your heirs will have several options as far as your home is concerned:
- Assuming there is value left in the home (Value of home less the Reverse Mortgage amount owed), they can sell the home. Any proceeds left over after the Reverse Mortgage is paid off are distributed to your heirs per your wishes.
- If one of your heirs wishes to purchase the home, they go out and obtain a loan to payoff the Reverse Mortgage that is on the property - thus paying off the Reverse Mortgage lender.
- If your heirs do not wish to be involved in the sale of the home the Reverse Mortgage lender will sell the home. The Lender will distribute any proceeds received after the Reverse Mortgage is paid off to your state.
- If there is no value left, the Reverse Mortgage Lender will sell the home and payoff the Reverse Mortgage. If the sale proceeds are not sufficient to pay off the Reverse Mortgage then the Reverse Mortgage Lender will look toward FHA/HUD for any remaining balance due. NEITHER YOU OR YOUR SPOUSE OR YOUR HEIRS ARE RESPONSIBLE FOR ANY BALANCE REMAINING DUE TO THE REVERSE MORTGAGE LENDER
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