Reverse Mortgage Help?

Your friend took out a loan on the house (that is why it is called a mortgage, and not free money).

Regardless of what type of loan it was, it has to be paid off eventually whenever he sells the house or dies. Most loans require payments every month until the loan is paid off, regardless of where you live. Because it is a reverse mortgage (special loan just for seniors), he agreed that in lieu of making monthly mortgage payments, he would have to live in that home as his primary residence. So in all the years that he has had the reverse mortgage, he has not made a single payment on the loan while living "payment free" in the home. That was the condition he agreed to, among others. The other condition was that he take care of the home in the same relative condition as when he took out the loan.

It is possible that when he first took out the reverse mortgage it paid off existing mortgages that your friend was unable to pay on his existing income, and it bought him some time to live as long as did in his own home. In a perfect world, as home values appreciate over time, and as he grows older, he would have been able to refinance in order to pull out more money in order to pay for caregivers so he could continue to remain at home. If you can get some idea of what his home is worth realistically (in the current state of disrepair), you can go online to some free reverse mortgage calculators and knowing his age, you can see how much money he would be eligible for. From these funds, he would first have to pay off his existing reverse mortgage. There is no prepayment penalty. This should give you an idea if he has any equity left to make it worthwhile to refinance.

Unfortunately, our economy is far from perfect. And with the house in disrepair, it appears that he may have spent all the money he received from the original reverse mortgage and may not be able to refinance (hopefully, you actually confirm this). If he is not able to refinance because the home value has not appreciated sufficiently to give him more equity, and he cannot live alone, then his only choices are to move out where he can get some care (the home will have to be sold to pay off the lender), or find someone who is willing to take care of him at home in lieu of free rent or some similar arrangement.

If the home sells for less than what it is worth (short sale), he is not personally liable for the shortage because it is a non-recourse loan. Any net proceeds belong to him. Very sorry for your friends predicament.

A reverse mortgage is typically set up so that when the person dies or moves, the house is sold. The mortgage company gets its money from the sale of the house. Then if there is any additional money left, the home owner gets that money.

Yes, it's true just as it's true of any mortgage. If he sells the house, the money he gets from the proceeds goes towards paying off the mortgage.

If he wants to keep the house but the bank requires him to remain as a resident of it, he will have to find the money to pay off the mortgage.

He can also keep the house if he can live in it 1 night a year. http://www.wisegeek.com/what-are-reverse-mortgage-...

However, if the house is in disrepair, the bank can call the loan in. One of his agreements when he took out the mortgage was to keep the house up.

NO. l don't think you (or him) heard that right. This is NOT a loan. He should not have to repay any of the money. The deal is he gets the money as long as he lives there, once he leaves, it become the property of the company he signed up with & they can do what they want with it. Most reverse mortgages only give you about 60% of the value of the house, so it is rare that they ever loose money on it.

NOTE; Read the contract he signed. All of the information about what happens if & when he exits the place are there. He is not the first to go through this. READ THE CONTRACT.

A reverse mortgage is when the owner of the house passes away, the home goes to the new mortgager. Reverse mortgage is you sold your house to the mortgage company. The terms of the contract homeowner lives in the house,but when the homeowner passes , the house is the banks.

Quote:"What the power of attorney needs to know is that, when the person who takes out the reverse mortgage is out of the home for 12 months or more, the loan is in default and the lender can call the loan."

see source for more info

Reverse mortgages are going to be the next "no-doc" loan fiasco. These lenders are giving WAY more money that these houses are worth, and the housing crisis continues.

He basically has to live there or repay the loan. One of those tricky little snippits they do not tell you before you sign up. The danger to the lender is that if he goes into care, that there will be a ton of care home liens placed on this property, which is why he has to occupy it or repay.

Then he sells the house and pays back the money.

You think there is a way he can not have to pay back the money he borrowed? Really? Of course he does.

Yes, this is true. He will have to sell the house. If he can not sell it they will foreclose on it.