PRINT PAGE EMAIL FRIEND ENLARGE TYPEFACE Reverse Mortgage Scenarios We are providing these scenarios as representative of the use of reverse mortgages in certain situations based on a compilation of cases and experiences. They may help you by illustrating how the reverse mortgage may be used. Each reverse mortgage is different, and is calculated based on the homeowners’ age, value of their home, available equity, lending limits, and current interest rates. Reverse Mortgage SCENARIO EXAMPLE #1 “Taking the family out in style...” Magda Age 74 Home Value - $240,000 Home Equity - $190,000 Approximate Mortgage Balance - $50,000 Monthly mortgage payment $1,600. The Challenge: Magda came to the United as a young lady from Sicily she never guessed that she would never go back to what she always considered “her home”. She married and had four wonderful children. She became a widow a little over ten years ago but her life is wonderfully full with her 4 children 12 grandchildren and 6 great-grandchildren. Her husband left her comfortable with a life insurance policy able to make her $1,600 a month mortgage payment but Magda wasn’t affluent by any means. She always dreamed about visit her beloved Sicily one day before she died. When her neighbor told her about the Reverse Mortgage she had just done and how happy she was not ever having to worry about making a mortgage payment again and how it made her sleep better at night having that worry off her shoulders The Solution: Magda decided to look into it. She had a local mortgage broker over to her house to explain the program to her but didn’t go forward. Somehow it she felt like the person probably also had a trunk load of vacuum cleaners and a brief case full of insurance applications. She didn’t like feeling pushed. She finally got the phone number of the company that did the Reverse Mortgage for her neighbor and called. She found out that they were exclusively Reverse Mortgage specialist and knew all the details of the program. Since all the process was on the phone, she felt that SHE was in control the whole time. Magda got the Reverse Mortgage. She eliminated her $1,600 a month mortgage payment. As she said, “it was like getting a 30% raise all at once”. Even after eliminating the remaining $50,000 of her conventional mortgage and the payment that went with it Magda still had $92,000 remaining which thrilled her with the idea that maybe her dream of visiting “home” again before she died wasn’t just a dream. Magda ended up renting a villa in Sicily for one month and took 14 of her children and grandchildren with her on a one month trip to “home”. Bon Voyage…… Reverse Mortgage SCENARIO EXAMPLE #2 "A new view on life..." John, Age 68, widower Home Value - $250,000 Approximate Mortgage Balance - $40,000 The Challenge: John is a widower who lives at home alone after his wife Martha died two years ago. He has lived in his house for more than 30 years and would like to remain in his home for as long as possible. John is current living on his Social Security payment of $1,250 and a small pension but lost his wife’s $680 social security payment when she passed away. John is not only feeling the pain of his wife’s passing, but the financial pain of a shortfall in his monthly budget. He is now having trouble making his mortgage payments and meeting expenses. His monthly mortgage payment is $611. Even with both Social Security income and pension, he is still short by $187 per month and that is with cutting out some of the expenses for hobbies he enjoyed. The Solution: John received letter telling him about the Home Equity Conversion Program. John called the number on the card and found that a Reverse Mortgage would go a long way toward solving his problem. After going over the program and doing the mandatory HUD reverse mortgage counseling, John took out a Reverse Mortgage which allowed him to tap into a savings account he didn’t realize he had. He was able to access $142,496 of home equity, tax –free and with no monthly payments. He paid off his current $40,000 mortgage and put the $611 back into his pocket every month and then took the balance in monthly payments of $681. After paying the mortgage off entirely, John’s monthly income rises to $1,291. That’s $611 per month for the mortgage payment, plus another $681 from the Reverse Mortgage. It was exactly what John needed at this point in his life. Reverse Mortgage SCENARIO EXAMPLE #3 "Keeping your health and home..." Craig, Age 79, and Sylvia, Age 74 Home Value - $375,000 Home Equity - $375,000 The Challenge: Craig and Sylvia are an active couple but over the last few years they have had to take more and more medications to stay in good health. They have come to a point in their lives where decisions will have to be made. The cost of monthly meds and treatments has made it difficult to stretch their fixed income to cover all the bases and find the money needed to maintain the quality of life they once enjoyed. They have to decide if they are going to downsize their beloved home or find a way to give themselves a steady and increased income and maintain their current lifestyle. The Solution: While looking for solutions to improve their retirement income on the internet they found out about the advantages of a Home Equity Conversion Mortgage, available only to seniors 62+. They were excited about the possibilities it opened up for them but they wanted to make sure everyone in the family was on the same page. They decided get together with their two children to inform them of their options. In the end, everyone was excited with the results. They decided to do the Reverse Mortgage and access the available $218,000 of equity that was made available to them without a monthly payment. They took the money and purchased an investment property which ended up being a duplex that generated $3200 per month income for Craig and Sylvia. The children were excited because they would inherit the income property as well as the remaining equity in their parent’s home. Everyone felt it was the perfect solution. Reverse Mortgage SCENARIO EXAMPLE #4 “Get Back on the Road Again” Kathy, Age 63, and Rinaldi, Age 71 Home Value - $165,000 Home Equity - $165,000 The Challenge: After many years of hard work Rinaldi and Kathy sold their home improvement business and retired. They thought they had the future covered. They bought a custom motor home that cost almost as much as their house and started to do something they always dreamed of…travel and see the country at their own pace. The RV was, as their grandson Ralph would say “awesome”. But, over the last couple of years it was spending more time in storage than on the road. No one counted on three and four dollar a gallon gasoline or seeing their investment savings cut in half by a down stock market. Rinaldi thought he might be better off taking some odd jobs on the side. The Solution: While golfing with his friend Craig, Rinaldi found out that Craig had done a Reverse Mortgage on his house and it had made all the difference in the world for him. Rinaldi looked into the program and decided that if he took out a Reverse Mortgage he and Kathy would have access to an additional $82,419 to use with no monthly payments. Kathy and Rinaldi took out the Reverse Mortgage and allocated a specific amount of the funds each year for RV travel and fun. As Rinaldi said, he is “back on the road again”. Reverse Mortgage SCENARIO EXAMPLE #5 Saying goodbye to the mortgage payment so ends can meet..." Gordon, Age 69 and Joanne, Age 56 Home Value - $350,000 Home Equity - $100,000 The Challenge: Making ends meet Gordon and Joanne recently purchased a new home. Other than the mortgage, they have no real debts, and since Joanne has a good paying job as a sales manager for a large corporation their monthly income is adequate for them to live a comfortable life. They were living what they thought was the American dream – until something happened to wake them up. With the downturn in the economy, Joanne’s company downsized and laid her off leaving them with a few months’ severance pay and that was it. Gordon was on social security. They knew they had to do something or lose the house and everything they worked for. They looked into a modification on their mortgage but found it only saved them a few dollars a month. Gordon was the one who first looked into the Reverse Mortgage program for seniors 62+ to see if it could resolve their problem. At first they had no luck since Joanne was only 56 years old and didn’t qualify for the program. They had given up on this option when they got a call from an out-of-state Reverse mortgage specialist. He went over their needs, discussed how they could get relief from their $2,300/month mortgage payment, and how to overcome the problem their current ages presented in getting a reverse mortgage. The specialist carefully analyzed their current financial situation and came to the conclusion that they could not afford their mortgage payment. It had to be eliminated for them to restore financial stability to their lives. The Solution: Gordon and Joanne took out the Revere mortgage but only in Gordon’s name since he was old enough to qualify. With just Gordon on the loan they were able to eliminate the mortgage payment and have a few dollars left over for emergencies. It allowed Gordon and Joanne to keep their home and plan for the future. Reverse Mortgage SCENARIO EXAMPLE #6 “Getting Control back in their life...” John, Age 68 – Mary age 67 Home Value - $150,000 Home Equity - $150,000 Approximate Mortgage Balance – none The Challenge: John and Mary retired several years ago and are still and active healthy couple. They have their combined social security income of almost $2800 a month that they live on, with a small retirement account that they do not yet take distributions on. While they make ends meet they have run up their credit cards doing home improvements and the payments are hitting them hard. John used his credit cards because he did NOT want to take money from his IRA in a down market. He is over 50% down on his IRA from the time he retired 3 years ago. John felt he didn’t have any options and used his credit cards to do some essential repairs to their house. A few weeks later Mary wrecked her car in a rainstorm and John realized they would have to get the money from somewhere. John felt he had lost control of his retirement planning. The Solution: Believe it or not, John got a call on the phone telling him about a Reverse Mortgage and he pressed #1 after the recording to speak with a Reverse Mortgage specialist. They educate him about the benefits of the Home Equity Conversion Mortgage program. John realized that he had another retirement account he didn’t realize he had – his home. This FHA insured program would allow him to access his home equity with no monthly payments and guaranteed he would not have to repay more than the value of the home when he sold and move or died and his estate sold the home. What appealed the most to him was that it protected Mary and him from every having to make a monthly payment or every have to worry about foreclosure. You can’t foreclosure on a payment you don’t have to make to make. John took out a Reverse Mortgage and received a lump sum of $30,000 to pay off credit cards and buy a car for Mary. He left another 52 thousand in a growing line of credit for a rainy day. John and Mary feel like they are back in the driver’s seat of their retirement. Reverse Mortgage SCENARIO EXAMPLE #7 “Saving Grace with a Reverse Mortgage” Kurt Age 78 and Grace age 69 Home Value - $230,000 Approximate Mortgage Balance - $140,000 Payment 1200.00 a month. The Challenge: Kurt and Grace had been snow birds from cold icy Michigan for years when 4 years ago they decided that it was time to stop the migration and buy a “nest” in Florida. They sold their Grand Rapids home and moved – lock, stock and barrel to central Florida. It was boating, golf and hanging out with other seniors just like themselves. They only wished they had made the move when their first retired. Life was good until Kurt had a heart attack and died. With that Grace found that all of a sudden things had changed. With the loss of one social security check and Kurt’s pension, her income was cut in half and her expenses were actually increasing with her own health issues. She found herself face-to-face with the dilemma that she and Kurt always used to joke about: “Having the money to either eat and buy medicine or pay the mortgage”. Grace was now living that reality. She stopped paying the mortgage. Not only did she stop paying the mortgage but she stopped opening the mail. If she thought it was from the mortgage company she put it in the top right hand drawer of her desk ….unopened. She knew that eventually the fateful day of foreclosure would come, and she was right. The Solution: Grace had heard about the Home Equity Conversion Program from commercials on television. She thought that it would be too late for her - she was in the process of foreclosure. She even went into a couple of big banks that she had heard did Reverse Mortgages but they told her that it was too late and that she didn’t have enough equity to qualify. Grace was desperate and sure that she was going to lose her home. She had even called her daughter back in Michigan to see if she could move in with her. In the middle of this drama she got a call from a company that specialized in Reverse Mortgages and spoke with a loan officer named Jason. Jason was understanding and reassured her that even though time was short and the available equity in her home was short as well, it would be a lot of work. But, he promised to try to make this work for her. Jason was amazing. He got permission from her to work with her bank to accept a lower amount that she actually owed. In the end, Jason was able to get the loan done when no one else would even try. She got her mortgage paid off with the Reverse Mortgage and with the $1600 each month she is able to make ends meet. As Grace likes to tell her friends, “the Reverse Mortgage saved me”. Reverse Mortgage SCENARIO EXAMPLE #8 “Putting it all on a level playing field” Thomas, age 74 and his wife Sandra, age 72 Home Value – $160,000 Approximate Mortgage Balance - $53,000 Monthly payment $620.00 The Challenge: Thomas and Sandra live in a charming Cape Cod on a quiet street that they love. They have put a lot of work into their house and yard and it is the showplace of the neighborhood. But Tom is forever the realist and has been saying for the last few years he, “can see the handwriting on the wall”. The truth is that he is having severe arthritis pain and it is getting harder and harder to get up and down the stairs. He and Sandra know that one of the keys to keeping independent is to move to a “senior friendly” house. That means they have to sell. The problem they face is getting their financial ducks in a row to be able to pull it off. A couple of years ago Tom had spoken with a Reverse Mortgage specialist but didn’t think the time was right. He had heard that the new HECM for purchase had been authorized by HUD at the beginning of 2009 and he decided to see if this new application of the Home Equity Conversion Program could be a financial tool to help them make the move. They put their home on the market and started looking for their new home. The Solution: Tom and Mary called Bill, the loan officer they had spoken with two years before, and were pleasantly surprised to see he still worked for the same company. They did their mandatory HUD counseling for the HECM for Purchase program and were ready to roll. They did their homework on the what kind of home they were looking for and where they wanted it to be. They found a great little townhome for $122,000 in a senior community with all the amenities they were looking for. Tom then called their loan officer and told him they were ready to pull the trigger. They made an offer and set up a purchase contract on the new home contingent of their selling the old one. Within the month they found a buyer for their old house and were ready to close on their new townhouse. The Reverse Mortgage numbers worked great! They sold their old home for $176,000. After paying off the remaining mortgage of $53,000 they were left with $123,000 for their new home. But they were doing the “HECM for Purchase Program”. So they did the Reverse Mortgage on their new house obliging them to pay $69,000 into the new townhome and finance the rest into the Reverse Mortgage with NO MONTHLY PAYMENTS. They were thrilled. They were into their new home – a $122,000 home for $69,000 cash and no required monthly payments with $44,000 left over to do whatever they want with, and they had the $620 a month they were paying on their old mortgage back in their budget. As Tom likes to say, the HECM (reverse mortgage) for purchase got him into a one level house and just….”leveled the playing field for his retirement”. He really feels he got a win-win. Reverse Mortgage SCENARIO EXAMPLE #9 “College isn’t as hard as they thought it would be” Dave, Age 74 and Carla 72 years old Home Value - $230,000 Approximate Mortgage Balance - 0 The Challenge: Dave and Carla had lived in the same home for over 25 years. It was the only home where they raised their two children, and it was also their best investment. They paid $35,000 for the home when they bought it and it was now worth over $230,000, even in the down real estate market. Dave and Carla had worked hard their whole life, they put their children through college, and now they were enjoying the fruits of all their labor. They have 3 grandchildren who are the light of their lives. As they like to tell their children, “they love them like a mother loves an only child….except they have four”. The oldest grandchild Michelle is reaching college age next year and Dave and Carla have decided that they want to help her and the other grandchildren with this important step of their lives. After all, they figured it is better to help now and watch them grow than leave it to them when they are both dead and can’t enjoy seeing their grandchildren benefit from their work. The Solution: In order to help their grandchildren, Dave realized he would need more than the money he had set aside. He knew that he would have to dip into his home equity. As he was getting the information on the home equity loan from his local bank, Dave heard about the FHA insured and guaranteed Home Equity Conversion Mortgage. He was intrigued. “Wow, a home equity conversion loan to all the things he needed to do with NO monthly payment.” It seemed too good to be true. The best of both worlds so to speak. He could access the money and not have to make the payment. As he looked into the program with his out-of-state loan officer (that he located when he called a special mailer that had been sent to him), he found out that this program was ideal for him. He would be able to do the loan, receive over $126,000 in a line-of-credit and use the money to pay for their grandchildren’s’ tuition as they needed it. The best thing was he didn’t pay interest on the money he didn’t use. Instead of costing, the money in the line of credit was actually growing for his future needs. It was perfect. Michelle, pack your bags, you’re off to college... These scenarios are only representative of the use of reverse mortgages in certain situations and are not actual cases; however, they are based upon a compilation of cases and experiences. These are used to illustrate how the reverse mortgage may be used. The values, names and details are merely examples and do not necessarily represent exact calculations and funding amounts. Each reverse mortgage is different, and is calculated based on the homeowners’ age, value of their home, available equity, lending limits, and current interest rates. [ TOP ] [ PRIVACY POLICY ]     [ TERMS OF USE ]