Reverse mortgage route works for Marysville woman

  • By Christina Harper Special to The Herald
  • Friday, October 31, 2008 7:35pm
  • BusinessMarysville

MARYSVILLE — Dorothy Remington of Marysville found herself in a quandary last year when she realized that her house needed a new roof and new windows.

Remington, 80, didn’t have the money to make the repairs to the Marysville home that her late husband had built himself for the family.

“I thought, ‘Gosh, how am I going to do that?’ ” Remington said. “Here I am sitting on all this money and I can’t even repair the roof.”

Remington knew that she had equity in her home and after talking to neighbors who had a reverse mortgage, she decided to look into the loan for herself.

Reverse mortgages, or home equity conversion mortgages, are federally insured private loans that were created by the U.S. Department of Housing and Urban Development.

To qualify for this type of loan, borrowers must be 62 or older and own their home outright or have a small mortgage that can be paid off with part of the loan they receive. The home must be their primary residence.

Reverse mortgages are not taxable income and homes that qualify include single-family dwellings and townhouses, condominiums and some manufactured homes. They cannot be used on land that is leased.

Remington did qualify for a reverse mortgage and after finding out as much as she could, decided to go ahead and take out the equity in one payment. She invested much of her lump sum and got her new roof and windows. She also used money from the mortgage to take a cruise to Alaska and plans another to Mexico.

Karen Stubrud, a mortgage planner with the Mortgage Advisory Group in Everett, specializes in reverse mortgages and helped Remington with her loan.

Some people are retiring and living longer and are not able to keep up with bills, the cost of living and repairs to their homes. They might live month to month on a fixed income and would like to be able to take a vacation or pay off some other debt.

“Retirees can use credit like anyone else,” Stubrud said. “I try and help them think it through.”

Stubrud says she thinks there are lots of myths surrounding reverse mortgages that may put people off asking about them. One of the myths is that the lender will own the borrower’s home.

False, says Stubrud. Lenders do not take control of the title. The lender will receive the amount of the loan back plus interest when the house is sold. Any remaining equity will go to the heirs of the estate. The debt is never passed on.

The loan is due “when the owner dies, moves out of the home or sells it,” Stubrud said. “You can never owe more than your home’s value.”

People also believe that good health, a certain rate of income and good credit are needed to qualify. The fact is that how much you can borrow depends on the interest rate, other loan fees and the appraised value of your home. Age is also a factor.

“The older you are the more you get,” Stubrud said.

Loans can be paid out either by lump sum, monthly payments, in a line of credit or any combination of the three.

Borrowers “can draw money out as a pre-inheritance,” Stubrud said. “It’s a choice they are making. It’s not the kids’ choice.”

Stubrud gets calls from families whose parents are thinking about a reverse mortgage. They want their mother or father to be comfortable with their decision. She walks them through the process and meets with clients and their families at their homes, if needed.

One of Remington’s concerns was that her kids would get stuck with paying the reverse mortgage when she dies. But she felt better learning that when the house gets sold the loan gets paid off.

“Unless the kids want it and buy it,” Remington said. “But it’s not on their shoulders.”

By taking out a reverse mortgage, Remington was able to help out her children financially and enjoy that opportunity with them.

“It’s one of those things that I’m very grateful for,” Remington said.

Christina Harper is a Snohomish County freelance writer. She can be reached at harper@heraldnet.com.

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