• Question
  • difference in rates for a reverse mortgage

    Asked by a 83 year old from Pensacola, FL on 12/1/2012

    one lender says $10,000.00 cash up front. another says $20,000.00 cash up front. Why the difference?.I have 4 proposals:
    all use the same appraisal value of $180,000.00 with a balance of $153,260.00 on the existing mortgage.
    1. $10,000.00
    2.$17,000.00
    3. $21,000.00
    4. $31,000.00
    How can there be such a wide difference in their quotes. I do not have a GFE yet

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  • Categories: Loan Amount and Type, Reverse Mortgages

Answers

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  • It depends on the program you select, where you live, and if your Lender is a Direct Lender or Broker. Direct Lenders are allowed to pay your fees.

    I know you're 77 but don't know where you live in Florida, so I'll assume you live in "Clearwater", and your were born today, 77 years ago. It's important for all the Lenders you're getting quotes from to use the exact same date of birth for you, because that's one of the variables that determines how much benefit you receive from the Reverse Mortgage.

    Your property doesn't have enough equity, so you're going to have a "shortfall". That means there isn't enough equity and you'll need to contribute some cash to enable the Reverse Mortgage to work. If you select the Standard fixed interest rate program with a 4.99% interest rate, your shortfall is $28,385.00 if I pay 100% of your third party fees and FHA's insurance premium (I'm a Direct Lender). The only fees you'll pay are the mortgage and intangible taxes.

    Your shortfall will be more if you select an adjustable interest rate, or Saver program.

    So it looks like the Lender quoting you $31,000.00 is the closest. If they're a Direct Lender, ask them to mirror my example, and your shortfall will decrease to somewhere around $28,000.00

  • Login to rate this answer:   Answered on 12/1/2012
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.