The Catholic Diocese of Nashville decided to offer Fee Simple ownership to owners of a condo in The Cloister at St Henry. The cost of Fee Simple purchase has risen by $1000 each year since that initial offer . I have heard people complain that they cannot afford converting to fee simple ownership. But, the Fee Simple ownership now allows possible qualification for a Reverse Mortgage. Reverse Mortgages could provide cash for living expenses beyond pensions, savings, and Social Security. If the market value exceeds what is owed on a home, it’s possible that mortgage payments can be eliminated, most likely a home owner could receive a monthly cash payment rather than having to make a monthly mortgage payment.
A Reverse Mortgage acts like an Annuity except rather than putting in cash you put in the value of your Cloister home remaining after your mortgages are paid up. There are many charges, fees, and requirements but some people may benefit by Reverse Mortgage cash with an improved current living situation.
Reverse mortgages were designed for seniors, senior homeowners over the age of 62 could possibly eliminate their debts (both mortgages and unsecured loans), and have a steady income (or large savings in case of emergency/rainy days). The reverse loan can allow seniors to not only eliminate their debts, but also to have a home, be independent, and have enough income to have a better life in retirement. (you select how you want to receive the proceeds).
Advantages of a Reverse Mortgage
You can receive lifetime monthly income or even select to receive a lump sum or credit line payment from the lender/bank. Purchase of Fee Simple ownership of your Cloister property is necessary to qualify for a Reverse Mortgage. If you meet all the other qualifications you may be able to eliminate mortgage payments and free up cash as inflation of food, energy costs, and taxes increase living expenses:
- you can pay off your existing mortgage or any other debts if your equity permits
- you keep ownership of the home (the bank will not own your home)
- retire without further monthly mortgage payment obligations
- select how you want to receive your equity income ( never taxed – no risk of not receiving the funds – select between credit line, lump sum, monthly income for life )
- any current or future equity is yours (if your home increases in value that is your equity)
- the home can be left for your kids/heirs – and if the home loses value they won’t be responsible to pay back the outstanding debt ( they can keep home or walk away)
- A Reverse Mortgage is federally insured to protect you from lenders and market conditions (no risk of default from lenders as it is a government backed loan)
- Mortgage insurance premium charged by FHA – the program has an upfront insurance premium to protect both lender/borrower and this adds costs to the loan closing fees – you may have to pay up to 2% upfront.
- this is a loan – the amount of money which would regularly be due as a payment is going to accrue onto the loan ( home prices may increase and offset this)
- many banks/lenders are now making it tougher to qualify for the reverse loan by introducing income/credit score requirements
- There are out of pocket reverse mortgage fees involved, roughly $500-$1000 (some seniors who have to make home repairs can include the costs into the loan.)
- To sum it up, a reverse mortgage is costly, but may be a good option for some.
Who Can Qualify For a Reverse Mortgage?
- must be at least 62 or older
- Cloister owners must own their home as Fee Simple property (primary residence must reside 183 days out of the year)
- have equity in the home ( equity is the difference between what you owe and what the home can appraise for )
- never have defaulted on government debt