Profile picture for Penny29

Refinaning for elderly couples

My parents are 68 and older and live in their home valued over $650,000 in San Francisco.  Outstanding mortgage is $350,000 with 6.88% rate.  Their annual income is $38,000.   They have been in this home since 1987.  Any chance of refinancing with a lower rate?
  • November 09 2010 - San Francisco
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (15)

I am not a big fan of Reverse Mortgages but I do believe they can qualify for a new loan with their current lender if they ask.  They have all ready displayed that they can pay the higher mortgage based on the 6.88% interest rate.  I have originated loans in the fast where compensating factors such as this one would close the deal.  Also it is important to know if the $38,000 income is investment income or social security.  If it is social security income, then we gross this up to $47,500 which may put them below 50% on their DTI (Debt to Income) ratio.  The lending environment is tough but banks like Wells Fargo, credit unions, and regional banks are still making exceptions.  Rates are low enough (3.75% on the average) where they may just squeeze in line for a good 30 year fixed loan.  Try this first before resulting to a reverse mortgage. 
  • May 09 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
Would HARP work instead of a reverse mortgage? It might lower their rate to about 4% and their payment from 2300 at 6.8% to 1670 at 4%. Many times you can get HARP from your current lender with no out of pocket costs for a slightly higher interest rate.

If all your parents need is a lower monthly payment, that might be the ticket to a lower rate if they qualify.
  • May 09 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

A Reverse Mortgage is the only loan that makes sense. 8 years at doing them and at their age they could get a fixed rate program with very little fee's and never have any payments as long as the home is primary residence. No worry about qualifying, they need to talk to someone local to sit down and explain details.

  • May 09 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

with that income your best option is to REVERSE Mtg. it or rent out if payment is too costly for current economic atmosphere. I have done many of these options, but do agree in some cases not the best option for everyone.
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

They will not be able to qualify for a traditional mortgage.  A reverse mortgage may be a good option.  Please be sure they speak with some one who is an expert on reverse mortgages.  I am not but there some excellent loan officers out there that will be able to help you.  I cannot stress enough the importance of being fully informed, going into a reverse mortgage with their eyes wide open. Good luck.
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Is any of their 38,000 income non-taxable?  

Social Security income for example would most likely not be taxable at that income level.  If so, they can "gross" up that income to a higher qualifying amount.   Not knowing the amount of their property tax or if they have any other debt, it is hard to say if their ratios could be kept in line.

You should also check if their current primary loan might be Fannie Mae owned.   Many loans are owned by Fannie Mae and if their is one of them, a HARP refinance would allow them to be eligible for refinance up to 65% debt ratio. 

As many mentioned below, servicing this debt is likely a struggle already, and it is unknown if they are receiving any help, but obviously if the 6.88 could be refinanced to current market rates it would be quite an improvement.
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Reverse mortgages are a good fit for many people.  One size doesn't fit all.  But 38K a year doesn't sound like much to debt service a 350K mortgage.  At 4.5% that's $1770.  How are they paying their mortgage now on 38K?  That's 3100 a month and mortgage of 2300.
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I agree with Wayne 100%. Quality of life in your later years trumps any issue one might have with the home not having equity to pass on to their heirs.

There is also no guaranty what-so-ever that the interest will eat up all of the equity. Assuming a return to a normal/healthy real estate market in the next few years, appreciation should be able to keep up with interest anyways. The maximum Loan-To-Value ratio on a reverse mortgage is quite low from the beginning and it's lower the younger the youngest borrower on the loan is (meaning that they require the home to have A LOT of equity on day one of the new reverse mortgage). At today's low mortgage rates, and a 30 year average real estate appreciation of 6% annually (according to NAR), it's more than reasonable to expect that the home will still have a great deal of equity when it's time to pass the home on to the kids, possibly even more than it does today.

~ Greg



  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

We primarily originate Wells Fargo's Reverse Mortgage Products. Although we have three others. This may be useful in helping your folks decide if this is right for them. http://reverse.org/

Best wishes, Rudi
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I would concur with Wayne.  Look into the benefits of a reverse mortgage.  There is even a fixed rate option.  This is a HUD regulated program and there are a lot of safe guards built into the program that protects the homeowner as well as the heirs.
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Dan,
Some day when you have lived in a home for most of your adult life and have all of the special memories that are attached, you may not want to look at moving into a rental as a solution to your quality of life. Economically if you crunch the #s it might make sense but you are dealing with in some cases the last years of one's life, and giving them an opportunity to spend that time in their home has special meanings. Reverse mortgages are not for everyone, but I have experienced many situations where they were life changing, and have appreciated the opportunity to be able to assist the seniors and their families/heirs provide a welcomed option. Even better news is the fees have been reduced by 100% in some cases making a reverse mortgage even more viable.
  • November 10 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for the_country_hick
A reverse mortgage is a financial suicide machine. The fees and costs with interest added mean the house has almost no equity when it is time to pass on to some heirs. I would avoid that option at all costs. I would rather see the house sold and the monies from the sale used to rent. It would make more economic sense.
  • November 09 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

It appears that your parents would be a good candidate for a Reverse Mortgage. Having a $2,300+ monthly payment plus taxes, ins, and maintenance/repairs has got to be draining their/your savings. Using a Reverse Mortgage to pay off the $350K existing mortgage would eliminate their mortgage payment and improve their cash flow significantly.
You can find Reverse Mortgage lenders in your area on www.hud.gov
  • November 09 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Penny29,

You always hate telling someone he/she will or won't qualify when you don't know the whole story, but from what you describe above, I can confidently say there will be an issue with debt ratio that will need to be looked at more carefully. 

Let's say your folks get a 30-year fixed rate loan at 4.000%.  The payment on $350K would be $1671, and this would constitute 52% of the income you state above.  Lenders usually want to see that ratio no higher than 45%, and of course I am not factoring taxes, insurance and other debt into the equation yet.

But again, I don't like turning folks away at the door when I don't have the complete story.  I am local and if you'd like me to take a closer look at this scenario (without cost or obligation), just get in touch.

Thank you!
  • November 09 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for ShaneWood
I'd say there is a good chance since current rates are around 4.375% so it would be worth talking to a local lender.
  • November 09 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.