A Reverse Mortgage Can Be a Solution for Senior Citizens in Mortgage Forbearance
There are people over the age of 55 who were or are in the workforce who needed mortgage forbearance due to being temporarily or permanently laid off due to the pandemic.
When current mortgage forbearances and mortgage payment moratoriums expire, a plan is put into place to bring the loan current. There isn’t a one size fits all solution for these forbearances. Lenders can make payment plans which increases the standard monthly payment to bring the loan current, add the payments to the back of the loan, or do a modification among other things.
But what about a senior citizen still looking for work? What options are available if they haven’t found work or if there’s not enough income to make the revised payment? The answer may be a reverse mortgage.
Reverse mortgages can pay off the existing mortgage balance and the new reverse mortgage doesn’t require a monthly mortgage payment to pay it back for the rest of their lives. The interest and other charges that accumulate on a monthly basis get tacked on to the back of the loan and get paid when the home either sells or the loan is refinanced.
Monthly mortgage payments can also be made on a reverse mortgage at any time and increment the borrower desires. A borrower can make a $200 payment one month, than $500 the next month or not make a payment at all.
A reverse mortgage loan amount is determined by the youngest borrower age (must be at least 55 years of age), the appraised value of the home, and prevailing interest rates. Income qualification is eased compared to a forward FNMA loan. The lenders main concern is that the borrower has the ability to pay their property taxes, homeowner insurance, home owner association dues (if applicable) on time. All other consumer debt, and new mortgage payments are not included when qualifying and there is no debt to income ratio on a reverse mortgage.
There are also new lower fee reverse mortgage options and loans up to $4 million.
We don’t know how each mortgage forbearance is going to conclude. But for homeowners aged 60 and above, the reverse mortgage can serve as a unique problem solver. If you have any questions on how a reverse mortgage works, feel free to send me an email or call me and I can run some numbers for you. Feel free to leave a question or comment below.
Stay well!
KW