Reverse Mortgage 101

Would Life Be Better in Reverse?

A lady is driving down a country road and sees a blossoming ornamental tree out the corner of her eye.  Since she has extra time to get to her destination, she slows down and puts the car in Reverse.  She wants to go back and enjoy the beauty of the tree.
This is something that a lot of us want to do in life.  If we have time, we want to go back and enjoy something.  The problem is that we may not be able to afford to go back. 

In many ways borrowing money is the same thing.  We want the money to enjoy something, but we cannot afford the payment that comes with borrowing.  This is the reason that you want to go in Reverse.

A REVERSE MORTGAGE gives you money, AND you are not required to make payments on the loan.  How can this be?  It is actually simple.  A person that has an abundance of equity in their home can essentially use their equity as a pledge in place of making a payment on the loan. 

Here is one basic example.  A person has a home that is worth $100,000, and they do not owe anything on the home.  This is great, but what is the equity doing for the person?  The answer is ‘nothing’.  You cannot eat equity, you cannot do any renovations or additions with equity, you cannot take a trip with equity, and you cannot pay for a grandchild’s education with equity.  But what if you converted the equity to something useful called money.  You can use the money to buy food, do renovations and additions, take a trip, and pay for college expenses. 

In 1989 FHA, a governmental agency, created a HECM.  A HECM is a Home Equity Conversion Mortgage.  This means that you can convert your equity to money, BUT you do NOT need to make a payment.  This is akin to actually having your cake and being able to eat it too!

Getting back to our example of the $100,000 home that has a zero balance….A person may be able to use a HECM to access $50,000.  The person would then not be required to make ANY loan payments on the $50,000.  The reason is that the remaining $50,000 of equity is used to cover any amount that would be paid.        

There are still requirements.  You need to qualify for the loan.  You need to maintain the home and pay your taxes, insurance, and other related housing expenses.

There is not anything in our world that is perfect for everyone, but practically everything is perfect for someone.  A REVERSE MORTGAGE may be the perfect thing for someone that you know. 

Kane Mortgage is owned by Kane Smeltz, who has more than 30 years of mortgage experience. He has a bachelor’s degree in accounting, along with an MBA.  Kane is also a real estate investor and believes that equity in properties can be used in an advantageous fashion.  He wants other people to receive benefits with real estate which is why he founded Kane Mortgage.

To find out about Options, Ideas, and Solutions (#OIS) specifically for you, contact Kane Mortgage at 717-541-5132 or contact us online.