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San Francisco Chronical
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George Paximadas-from Reverse Mortgages of California Inc. was interviewed on Reverse Mortgages by Judy Richter from the San Francisco Chronical. This is a partial reprint that appeared on Sunday, August 19, 2001
Mrs X's house in Alameda is worth about $500,000 , but the 86-year old widow
couldn't afford to fix the leaky roof or broken furnace. With an income of only $632 a month from Social Security, she spent the winter huddled in blankets trying to keep warm.
Then she went to George Paximadas, a reverse mortgage consultant and got a $170,000 line of credit. She plans to spend about $30,000 to fix up her house and still can receive $1,100 a month for the rest of her life. She did what many other cash-poor, house-rich seniors are doing today;
They are using their equity to fix their houses, increase their income, pay bills or travel.
A Reverse Mortgage is just what it says; a mortgage that works in reverse. Mrs. X borrows money against her home but
doesn't make any monthly payments. Instead she gets money, and the borrowed amount accrues interest and comes due when she dies, sells or vacates the house.
The basic requirements for a reverse mortgage are to be at least 62 years old and the occupant of your home. The homeowner must continue to pay for the property taxes, insurance and maintenance.
Although it's preferable to own the house free and clear, many seniors use a reverse mortgage to pay off their old mortgage and any other liens.
Reverse mortgage programs include the Home Equity Conversion Mortgage, which is insured by the Federal Housing Administration (FHA) ; the Fannie Mae Home Keeper Mortgage, which has features favorable for higher property values, condominiums and home purchases; and the privately funded Cash Account Plan offered by Financial Freedom Senior funding Association.
How much one can borrow is determined by age, the value of the house and the current interest rate.
"The older you are, the more you're going to get," said
Paximadas, citing life expectancy figures.
The loan must be paid off when the owner sells the house, vacates it for more than 12 months or dies. In the case of death, the heirs may sell the house, pay off the lender and keep the rest.
Even if the homeowner outlives the value of the house, the borrower still gets their monthly checks. There’s no way that the heirs have to worry about the bill. However, borrowers must understand that a reverse mortgage can lower the value of their estate.
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