Proprietary reverse mortgage lenders offer variations on the traditional reverse mortgage product to meet the needs of certain borrowers. These variations include offering reverse mortgage products to borrowers 55 years of age or older in California.
If a borrower over 55 years of age would like to access cash from their home equity, but doesn’t want to liquidate the existing first mortgage2, a reverse second mortgage option is available. The homeowner would continue to make payments on the first mortgage and receive a second mortgage that does not require monthly payments. This is ideal for a borrower who would like to access cash and have the non-payment benefits of a reverse mortgage, but can debt service their existing mortgage, especially if that mortgage is at an historically favorable rate. Because this loan is in second position behind a fully amortized first mortgage, the maximum loan limits are greater than if a new reverse mortgage paying off the current first mortgage were obtained. These second loans can be anywhere between $50,000 and $4,000,000.
In California, borrowers 55 years of age and older who have existing mortgages with more than 10 years remaining on the term can obtain a hybrid type reverse mortgage. The borrower obtains the loan, pays off the existing mortgage, and makes a mortgage payment for 10 years that is a fraction of the current mortgage payment, often less than an interest only payment. After the initial 10 years, the mortgage becomes a full reverse mortgage not requiring payments to be made for the remainder of the loan. This option allows borrowers to ease cash flow for the initial 10-year period, after which they can enjoy the full benefit of no monthly payments of a reverse mortgage. This option is only offered to borrowers who are short of cash to close on the HECM and other proprietary products. In other words, the principal limit from those programs was insufficient to close without a contribution from the borrower. This option is available in loan amounts from $100,000 to $4,000,000.
These alternatives offer many of the same features as regular reverse mortgages:
· Non-recourse3
· Retain ownership of property
· Enjoy the benefits of the reverse mortgage until a maturity event4.
Reach out to us at Watermark Capital to see if these options can be of benefit to you.
1 Products are available in select states and have varying guidelines depending on the State. Contact us for more information.
2 Certain types of first mortgages are not allowed.
3 See Non-Recourse Nature of a Reverse Mortgage. (Coming: July 15, 2024)
4 See What to do when the loan comes due. (Coming: July 15, 2024)
