Florida And New Regulations!

The reverse mortgage world is full of regulations.  These are mostly transparent to the average senior with the exception of additional paperwork.  These regulations are put in place to ensure the senior's best interest is kept in mind. 

Unfortunately, seniors are often taken advantage of and or don't understand what and how a reverse mortgage works.  In reality this product is very simple to understand and if the senior takes a few minutes they will understand it completely. 

There are no smoke and mirrors and everything is clearly defined, assuming they have a competent loan officer who will take the time to answer questions that not every senior will think to ask.  A reverse mortgage in Florida will have a rising balance vs. a conventional mortgage which will have a falling balance.  It's really that simple with some minor caveats. 

As an example,  you must live in the home and if you choose to vacate the home for 12 months then the loan is due and payable meaning you need to sell the home and pay the bank the balance due on the loan.  Any proceeds over the sales price less what you owe the bank /closing costs  that would be kept by you or your heirs depending on who sells the property etc...  The other consideration a senior must understand is the aspect of compounding interest.  As the loan balance grows,as an example: if you start with a $100,000 balance on your loan and after one year you owe $105,000 the interest for the next starts with the $105,000 therefore your loan balance might grow faster than you expected.  Now, to offset that you could have appreciation on your home.  Nobody knows the future of interest rates or home appreciation but consider this simple example. Remember, this is only and example so you can follow the numbers with ease.

If your home's value was $200k when you started your reverse mortgage and your loan balance was $100k your loan balance next year would be about $105k (depends on the product you choose naturally but this is a reasonable number) and considering a modest home appreciation rate of 2% the equity would rise $4,000 to offset the $5,000 in interest.  So the difference in your equity position is only $1,000 vs. the $5,000 in this example..  However, if you had a mortgage payment you were making prior to the reverse mortgage, then the monthly mortgage payment would also be added back to this equation, most likely making it look very appealing!  The problem always is, no one can predict the future so there are no guarantees in life and unless you have a fixed rate mortgage the increase your loan can be slightly higher or lower than you expected.

Also Read More About- What will a reverse mortgage in Florida cost me?

Despite this uncertainty, Florida, reverse mortgages are on the rise mainly because of the senior population living longer and inflation which continues to soar.  Inflation is generally considered bad but when the seniors house rises in price, then it can provide a unique cash flow advantage that can be executed with a reverse mortgage.