AboutYan Ross Expertise Reverse Mortgages are a financial tool available to homeowners of the age of 62 or older. They are not for everyone. Mr. Ross provides responses to questions regarding eligibility, terms, consumer protections, financial requirements, and all other aspects of HUD-sponsored and other private program Reverse Mortgages.
Experience In addition to my legal and general business experience, I have trained with John Bennett, of Home Lending Specialists, the leading and most experienced originator of reverse mortgages in the country. I have mastered both academic and practical aspects of the reverse mortgage business, with special emphasis on consumer protections.
Education/Credentials Author, Certified Home Equity Conversion Mortgage Specialist (CHECMS) course, Institute of Consumer Financial Education (ICFE)
Bachelor of Arts, Princeton University --
Juris Doctor, Yale Law School --
Accredited Educator in numerous professional disciplines
Question QUESTION: Good morning, Yan,
I live on Long Island, NY. I'm extremely interested in a reverse mortgage. I'm 65 and will begin to collect full SS benefits in May (65+10 months). I have a full time job which I have no intention of leaving. My husband is 69, 70 in Sept. His primary income is SS. He otherwise has no steady job. My home is a 2500' colonial worth, in today's market, at least $550,000. My mortgage balance is $99,000 My property taxes are a bit over $9,000 annually. My loan rate is 5.75% My monthly mortage payment is $1369 which includes property taxes. My husband and I want to divorce, but he cannot leave without a significant payout. The reverse mortgage is the only way we can accomplish this. I've read that RMs are terrific. Conversely, I've also read that they are very expensive. I don't understand what interest rates apply, how they increase the debt, the percentages, etc. The HUD reverse mortgage sounds the safest and least costly but won't leave sufficient funds for him to be able to leave. Any information, advice, opinion you can give me is tremendously appreciated. I look forward to hearing from you. Many thanks,
ANSWER: Hello, Judy, and thanks for your inquiry.
You raise many questions in search of a comprehensive answer, and the reverse mortgage is only one aspect of a feasible plan.
Let me encourage you to seek professional legal and accounting advice, as I cannot give you formal opinions; I can, however, offer you some factors to take into consideration as you proceed.
First, I am not sure that the RM is "the only way" you can get the result you seek.
I am happy to try to help, but I need some additional information.
Let me mention a couple of assumptions and further questions, and invite you to respond with clarifications.
1. You indicate that it is "your" house alone and that your husband would be leaving. Accordingly, the RM calculations would be based on your age.
2. Due to your relatively young age, the amount available to you under the HUD-sponsored RM program would not be sufficient to pay off your existing mortgage and leave much cash; it would be, as you suggested, "expensive," with fees in excess of $10,000. I can run numbers, but would suggest that you check with a NY-qualified RM lender for specifics in your own case. The numbers you receive should be the same from any HUD-qualified lender -- and you should not, under any circumstances, pay any up-front fees for a quote. Have you done so?
That said, let me suggest that you look at other assets beyond your home, such as IRAs, 401(k) accounts, and others to which you might use to transfer access to cash to your husband. In most states, a "qualified domestic relations order" permits the transfer of retirement accounts to a divorcing spouse without adverse tax consequences.
Depending on his need for an asset rather than an income stream, you might also consider alimony (income to him and deductible for you) over a period of time or under defined circumstances.
Again, I encourage you to seek professional advice, as the conclusions are beyond my scope.
I hope that helps, and wish you both well in your new life.
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QUESTION: Thank you, Yan, for you quick reply. No, the house is not mine alone. I'm sorry I gave that impression. I see that I did refer to it as "my home." Only my name is on the loan, but his and mine are both on the deed. We would do the RM first, and he would leave after. I would not do an RM if our goal cannot be accomplished. HIs name may or may not remain on the deed. I don't know the pros and cons of that.
We have not gotten any quotes. The upfront costs I was referring to are the thousands for closing costs. As far as other options are concerned, I have very little in my 401K (of which my employer matches nothing), and an IRA with perhaps $14,000. I have no other pension or retirement plans. I absolutely do not want to pay alimony. I don't have enough income to do that. Somehow, he comes up with his share of the mortgage payment every month as well has 1/2 of the regular monthly expenses which is usually around $800. I have no idea where he gets this money. I'm just happy that he pays it. According to all the RM calculators I've used plugging in both our birth dates, we would get $114,000 after our current mortgage is paid off. It seems the more I research the more complicated it gets. I'm thinking this is not a financially prudent course, at this time. I have already been in touch with our accountant. Thank you, again for you reply.
Answer Judy,
Thanks for the clarification.
Just a couple of additional thoughts.
RM calculation is based on the age of the younger of the homeowners, so your age controls in any case.
As I indicated, the "closing costs" would exceed $10,000 -- but relieving you of further principal & interest mortgage payments is a consideration: your monthly real estate tax would still be over $750, plus homeowners insurance.
There are obviously personal considerations that go far beyond the scope of the RM inquiry, in terms of the life outcomes you each want.
Assuming there is still good will between you, I would suggest that you work with a professional planner (accountant, attorney, etc.) to reach some decisions.
Good luck!
