Reverse Mortgage Disclaimer Deed & Consequences thereof
Mortgage companies factor the amount of available funds, for a borrower to receive, based upon current interest rates, home value, and age of borrower. Older reverse mortgage borrowers receive more money their younger counterparts.
In the very typical situation in which 2 borrowers will be on the loan, the mortgage company discounts the older borrower and only takes into consideration the younger borrowers age.
This makes sense from a lenders point of view. After all, the mortgage doesnt end until the last surviving spouse either kicks the bucket or sells the house. From a lenders point of view the mortgage cant exceed value or the lender loses money.
With that in mind the lender must give the younger borrowers a lower loan to value ratio than the older ones. The young ones will be in the home longer, and the lender must account for the power of compounding interest working against the security for their investment.
That being said borrowers may realize a dilemma if one spouse is quite a bit older than the other. If the couple needs a sizable sum of money out of the mortgage, the age of the younger borrower can dismantle this plan.
How some people get around this is by disclaiming the younger spouse from the note and deed of trust. They can now cash out at the larger sum.
Bingo! Theyre now in the money.
Of courseit couldnt be that easy, could it? There is something that perhaps our couple didnt think through in this scenario. The older spouse is probably going to die first.
If the older spouse passes away first, the bank will eventually find out and will call the note due. From there the surviving spouse has about 12 months to pay the bank back.
People with tons of money in the bank and investments dont normally get reverse mortgages. With that in mind the spouse will 95 times out of 100 be forced to sell the home to pay the lender.
The important thing to think through is that many people have long emotional ties to their home. My suggestion is to be sure the financial obstacle you wish to overcome with a reverse mortgage, by disclaiming the spouse, is worth the emotional heartache of losing the home too.
Removing the younger borrower from the note should be done only if necessary, and if both parties have full comprehension of future consequences.
In the very typical situation in which 2 borrowers will be on the loan, the mortgage company discounts the older borrower and only takes into consideration the younger borrowers age.
This makes sense from a lenders point of view. After all, the mortgage doesnt end until the last surviving spouse either kicks the bucket or sells the house. From a lenders point of view the mortgage cant exceed value or the lender loses money.
With that in mind the lender must give the younger borrowers a lower loan to value ratio than the older ones. The young ones will be in the home longer, and the lender must account for the power of compounding interest working against the security for their investment.
That being said borrowers may realize a dilemma if one spouse is quite a bit older than the other. If the couple needs a sizable sum of money out of the mortgage, the age of the younger borrower can dismantle this plan.
How some people get around this is by disclaiming the younger spouse from the note and deed of trust. They can now cash out at the larger sum.
Bingo! Theyre now in the money.
Of courseit couldnt be that easy, could it? There is something that perhaps our couple didnt think through in this scenario. The older spouse is probably going to die first.
If the older spouse passes away first, the bank will eventually find out and will call the note due. From there the surviving spouse has about 12 months to pay the bank back.
People with tons of money in the bank and investments dont normally get reverse mortgages. With that in mind the spouse will 95 times out of 100 be forced to sell the home to pay the lender.
The important thing to think through is that many people have long emotional ties to their home. My suggestion is to be sure the financial obstacle you wish to overcome with a reverse mortgage, by disclaiming the spouse, is worth the emotional heartache of losing the home too.
Removing the younger borrower from the note should be done only if necessary, and if both parties have full comprehension of future consequences.
About the Author:
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posted by Debt Consolidation Loan at
5:13 AM
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