A reverse mortgage is a type of loan that allows homeowners, age 62 and older, to turn their home equity into cash, while still living in and owning their home. In this interview, Doni Dolfinger of Universal Lending, discusses the details of obtaining a reverse mortgage on your home.
Interviewer: Today, we’re talking with Doni Dolfinger, a reverse mortgage specialist, with Universal Lending, and Doni welcome to the show.
Doni Dolfinger: Well, thank you so much, glad to be here.
Interviewer: In our previous segment, we have been talking a little bit about reverse mortgages and we were continuing that, but again for those not familiar with the term or what it is, can you explain it?
Doni Dolfinger: Certainly, a reverse mortgage is simply a loan against a borrower’s home that does not have to be repaid as long they live there. It’s a loan without a mortgage payment.
Interviewer: Okay. Could they repay it, if they wanted?
Doni Dolfinger: Absolutely, and many people will use a reverse mortgage with the intention of paying it back, and they can certainly make payments at anytime without any penalty.
Interviewer: Someone might be saying to themselves that sounds expensive, like it’s going to cost me a high interest rate or something to that affect, if there is a lot of points upfront or, is that true?
Doni Dolfinger: You know, they are lot less expensive than they once were, yes in the years past, they were quite expensive, but we have done a lot to change that. In fact there is a new program called Home Equity Conversion Saver, or HECM Saver, and it’s for people who would like to take less money upfront, but have less fees involved in the transaction, so it really helps people who are trying to preserve more equity for the estate.
Interviewer: Alright, walk me through this. Let’s say my mom did a reverse mortgage and she passed away.
Doni Dolfinger: Right.
Interviewer: And at the time she passed away, she owed a hundred thousand dollars on the house and maybe the house is worth one twenty, what happens?
Doni Dolfinger: You know, usually if my customer passes away the same thing happens that would happen on a normal transaction, even if they have just a traditional loan on the property. Usually they will sell the house by calling a realtor, listing the home with the realtor; the realtor will contact the title company. The title company orders the payoffs and at the settlement table, the check is then issued to the seller for what ever remaining equity is available.
Reverse mortgage
Interviewer: Okay. If they were underwater, what would happen?
Doni Dolfinger: FHA would pay the loss, so FHA is who is on the hook for the balance to the mortgage insurance, it’s not the tax payers paying that loss, if there is one, its covered with the mortgage insurance
Interviewer: Alright, so now mom’s getting some income in, and she is worried that it might affect her social security or it might affect her Medicare benefits.
Doni Dolfinger: Right.
Interviewer: She’s worried about, is she is going to get taxed on it, what happens there?
Doni Dolfinger: You know, reverse mortgage is not considered an income by the government. So they are not taxed on it. We have customers who are on SSI, old aged pension, even Medicaid that could qualify for this program. But, if your mom is on Medicare and Social Security, they definitely don’t have to worry about the funds from the reverse mortgage.
Interviewer: Alright, so is there anything that mom’s got to watch out for?
Doni Dolfinger: You know, I think this is such a regulated program; we have regulations not only on what we charge but they have to go talk to a counselor to get it, to even obtain this type of a program or loan. So, I think the primary thing I would watch out for is if there’s someone who is trying to sell them a reverse mortgage, and help them "Invest the money", that might be a red flag.
Interviewer: Yeah! Last but not least so somebody is saying okay, this sounds good this might be an option for me. How do they know if it’s right for them?
Doni Dolfinger: First thing we are going to do is we are going to send them to a FHA counselor, we give them a list of counselors and they can choose which one they prefer to go to. The counseling is just designed to help the consumer with the questions to educate them with the pro and cons of the program, so that they can make an educated decision.
Interviewer: Great information. Thanks so much for being here.
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