How does a reverse mortgage affect the equity 5 to 10 years down the road?
My mother is 84 yrs old. Fifteen years ago she changed her deed into my name and my six sisters names and added a life estate. The home is in much need of repair and updating. My mother, myself and 3 of my sisters want to take out a reverse mortgage. however, three of them want nothing to do with it. The house was appraised for $455k we are looking to borrow against a reverse mortgage line of credit about $175k. How will this effect the equity in the house say, 5-10 years down the road?
To take out a reverse mortgage, all of the owners must agree to it. With the deed as it stands now, all 7 siblings and your mother would have to give permission. Plus, all borrowers need to be at least 62 to qualify for an FHA -insured HECM (Home Equity Conversion Mortgage). I doubt that all of your siblings would qualify.
In order to obtain the maximum reverse mortgage, you should think about changing the deed back to your mother's name only.
The amount that can be borrowed, or made available as a line of credit, is determined by the value of the house, the location of the house, and the age of the youngest borrower. Based on the value of your mother's house and her age alone, she should be be able to access a fair amount of money from a typical reverse mortgage --- if she is the only homeonwer. You and your siblings could then inherit the house either through a will or trust after her death.
The equity that is available to pay off the mortgage will depend on how much has been borrowed. If you contact a reverse mortgage specialist, he or she can create specific models to give you an idea of how the equity in your mother's home will be affected.
This answer is incorrect. If the mother has a "life Estate" she can obtain a reverse mortgage in her own name, per HUD guidelines, HOWEVER, ALL the siblings on title would have to sign on the new title as "REMAINDERMAN" but they would NOT be on the note. Please see HUD guidelines or check with a title company specializing in reverse mortgages for a full explanation. Bill Binkey, Sr.Reverse Mortgage Consultant.
I have numerous clients whose property is held in a life estate. The HUD regulation (HUD Mortgagee Letter 97-15) regarding a life estate states: the property may be held in a life estate if the future interest holder(s) (aka remainderman) sign the DEEDS at loan closing and give up all interest in the property. The future interest holders will sign a document stating they are giving up all interest in the property. The future interest holders do not have to be 62 years to do so. NEVER remove anyone's name from title without legal advice! Sandy Jolley, Reverse Mortgage Suitability and Abuse Expert
If there is a life estate the future interest holders (remainderman) must sign the deeds at closing, and give up all interest in the property. See HUD Mortgagee letter 97-15. Get financial and legal advice before giving away your rights to the property. Sandy Jolley, Reverse Mortgage Suitability and Abuse Expert