Cora Carleson ........................... 4

Hey Cora: I have a reverse mortgage and I still live in my home. I am not completely sure I understand how this works; what happens to my home when I pass, do my kids get it or have to deal with it, sell it etc.? How do I make sure this is not a burden to them? Signed: Not Sure how this works

Dear Not Sure; Reverse mortgages can be a big help to people, but they can also be hard to understand. Essentially, what you are doing is allowing a mortgage company to buy your home at a specific price. Wait, take a step back, story time!!! Let’s say your home is worth $300,000 on the Real Estate market. A reverse mortgage company will pay you a lesser amount, say $250,000 (typically a percentage of the current market value) for your house, you stay in the house, don’t move out and it remains IN YOUR NAME (no, you do not have to sign the title over). They will give you those funds all in one lump sum, or you can take it out in monthly, quarterly, or yearly increments. As the months and years go by, that $250,000 collects interest, even though you are not making any payments. That rate is spelled out in your closing documents, and so that balance increases as time goes by because that interest adds up each day.

Now, let’s say 15 years have gone by and you are still living in the home, you have used all the $250,000 that was loaned to you by the Reverse Mortgage company and now, the house feels too big, there are too many repairs to do, and the utilities are too high. You have the right to get a payoff quote from your reverse mortgage company and pay off that $250,000 plus any interest that has accrued. Just for the sake of easy numbers, let’s say that there is $50,000 in interest owed, that leaves you with a balance of $300,000 that needs to be paid to the Reverse Mortgage company. You call your friendly realtor, (probably ME) and you discover that your house is now worth $410,000! Well, that’s a lot more than $300,000. You could live quite comfortably in a nice apartment with lower heating bills.

The house is sold, the Reverse Mortgage Company is paid off and you have a tidy sum in your bank account to live comfortably.

That’s how they work, but your question is, do your children or heirs have to deal with the Reverse Mortgage company after you pass? The only thing that they should have to deal with is notifying the company of your passing. They have a certain number of days to remove personal items from the house usually 30 to 90 and they are done. However, they do not get anything from the sale of the house. Even if there is equity in the house, it will go the reverse mortgage company to pay off the debt that you borrowed, and any interest owed. If there are funds remaining – guess what, they get to keep that.

In a market like we have today, if you have a reverse mortgage, it may well be worth it to you to see if there is still equity in your home even after the reverse mortgage company is paid off. Our real estate market has had a price adjustment recently, I know it seems like we had major price increases, but it was actually just an adjustment. Our market had remained flat for a long time, when that happens, the economy chugs along, and the real estate market stays flat or it only increases very slowly, but it must adjust. This is what has happened in the last few years – seems like crazy prices, but it truly is just an adjustment. So, it would be better for those that do have a reverse mortgage to see if perhaps, they have equity sitting there waiting to be used. It can be used by you now or be used by the Reverse Mortgage company later. In my opinion, I would like to see YOU use it!

Now, with all this said, a financial advisor may be the way to go to help you make this decision. For tax reasons or other reasons that I wouldn’t know about, this may not be the best bet for you. But if you ask your financial adviser and if they say, “heck ya, let’s look into that!” then give me a call and we will see if this could work for you. You may be surprised at what we find.

Remember, call me with your real estate questions, I love hearing from you. Oh, also, if you want a free copy of my book, Home Improvements that Improve Value, send me a quick email and I will get one out to you! Enjoy the summer my friends and please, kill as many mosquitoes as you feel comfortable killing, whoa they are bad this year!

Call Cora Today!

Keller Williams Realty Alaska Group Of Wasilla 621 S Knik-Goose Bay Rd Wasilla, AK 99654

www.clcandassoc.com 907.982.5700