Examples of Reverse Mortgages

The following are fictional cases of how reverse mortgages can benefit various folks...

John & Mary Smith - The house they purchased in 1964 for $14,000 is valued at $650,000 now.  Their home has been paid off for decades.  He is 82 and she is 83 years young. A Reverse Mortgage would give them about $331,500 now, or $2,979 per month for the next 216 months.  (The money available to you from a Reverse Mortgage is based on your age, the value of your home, any existing liens, the state and county your home is located, and market conditions.  Market conditions on May 30, 2007 were used in this example.) 

Bob & Joan Brown own a home valued at $575,000.  They have a mortgage balance of $100,000 that they would like to get away from.  He is 69 and she is 67.  They don't need income, and after their mortgage payment of $950 per month is gone they will have extra money left each month for that road trip they want to take.   A Reverse Mortgage would give them about $209,000.  After they pay off their home they will have about $109,000 left, and an extra $950 per month to spend!  They could have that $109,000 in one lump sum or they could have a credit line on their home.  They could also have a monthly advance of almost $846 per month!    (The money available to you from a Reverse Mortgage is based on your age, the value of your home, any existing liens, the state and county your home is located, and market conditions.  Market conditions on May 30, 2007 were used in this example.) 

Fred Mitchell was married for over 25 years.  His wife has passed away now and he wants to do some traveling.  He has a fixed income that allows him to live modestly.  He still wants to keep his house, valued at $550,000, and live in it every few months, (you have to live in your home a few months per year to keep your Reverse Mortgage in affect) so at age 70 he has decided to buy a sailing yacht and see some of the Pacific Coast.  A Reverse Mortgage would give him approximately $218,000, which he could use to purchase that nice boat!  Remember, the money you receive from a Reverse Mortgage is loan, and you can use that money for anything you want!  (The money available to you from a Reverse Mortgage is based on your age, the value of your home, any existing liens, the state and county your home is located, and market conditions.  Market conditions on May 30, 2007 were used in this example.) 

Wilbur & Barb Smith have a home valued at $16 Million Dollars.  Wilbur is 82 and Barb is 80.  They decided that they wanted to give a large sum of money to a charity while they were still living.  Their finances were already sorted out.  By tapping into the $16 million dollars of equity in their home they were able to get a one-time tax-free lump sum of $8,080,000.  A portion of that was set aside for their grandchildren, some was used to purchase a large Life Insurance Trust, and the rest was donated to their favorite cause.   (The money available to you from a Reverse Mortgage is based on your age, the value of your home, any existing liens, the state and county your home is located, and market conditions.  Market conditions on May 30, 2007 were used in this example.) 

Edna Call purchased her dream home a few years back.  She is 70 now, and some things happened to her investments that ended up affecting her cash flow.  She has a $310,000 interest-only note that she pays $1,776 per month on.  She will no longer be able to pay this note in the next few months, and as a result will lose her home.  She qualifies for $306,000 on a non-FHA Reverse Mortgage.  This is a non-recourse reverse mortgage.  Her closing costs are $0.  The FHA would only give her $213,080.  That amount was not enough to pay off her existing mortgage.  Her closing costs on the FHA Reverse Mortgage would have been $16,846, too.  Edna withdrew $4,000 from an annuity she had (with no penalty) and added that to the funds she received from her reverse mortgage.  Now she can stay in her home for the rest of her life and not have to worry about a mortgage payment.   (The money available to you from a Reverse Mortgage is based on your age, the value of your home, any existing liens, the state and county your home is located, and market conditions.  Market conditions on June 17, 2007 were used in this example.) 

Christopher M Plante, California Dept of Real Estate Broker License 00902661