Reverse Mortgage, Forward Thinking
As a notary public, I have loved being able to witness my clients sign their name on closing documents and become homeowners. Owning a home is one of the most rewarding investments you can make for several reasons. 1) There really is no place like home, a place that houses so many memories. 2) It can be a highly profitable investment, if you plan appropriately and do your research. One option for homeowners to tap into the equity of their house is with a reverse mortgage loan.
What is a Reverse Mortgage?
A reverse mortgage (aka the home equity mortgage) is a loan that allows homeowners to borrow money by using their home as collateral. With a reverse mortgage, the borrower:
Is not required to make their monthly mortgage payments and the title stays in their name.
Has the option to receive the money as a lump sum, in monthly payments, or both.
A reverse mortgage is available in California to those 62 or older and must be paid back when the borrower does not live in the house anymore. For senior citizens, a reverse mortgage is a great way to get cashflow when home equity is their largest asset. This type of loan is the only way to get the money from the equity of the home without having to sell it. A reverse mortgage may also ease the financial strain of living on a fixed income after retirement.
How a Reverse Mortgage Works
The loan becomes due for payment when the last homeowner moves out or passes away. In this occurrence, the estate will have about six months to repay the reverse mortgage loan balance. Alternatively, the estate could sell the home as a way to pay off the balance. All of the remaining equity from the sale is inherited by the estate.
Reverse Mortgage Power Team
A power team for this transaction include a loan officer, estate planning attorney, and a notary public. It is important for the homeowner to have a trusted and reliable team that can ensure an efficient reverse mortgage process.
The loan officer will likely recommend that a trust be used when completing the reversal process to avoid the home going into probate.
An estate planning attorney will ensure that a homeowner’s rights are protected throughout the entire process, and can help to navigate through the various reverse mortgage loan options available.
A notary is crucial to the process because they legitimize all of the documents that make the reverse mortgage final and legally recognized. The notary will thoroughly review all documents for potential errors that could delay the entire process.
Reverse Mortgage Documents
Notaries can expect a robust loan document package at a reverse mortgage signing. Within this packet the notary will find two mortgages (the original mortgage loan and reverse mortgage loan) and two real estate lien notes. The notary public should never give legal advice to the borrower and only answer questions pertaining to the document.
Once the notary public is appointed by the loan company or loan signing agent, the borrower is a few signatures away from completing their reverse mortgage process. Once finalized, the homeowner will enjoy the freedom of zero mortgage payments while enjoying the equity their home has accumulated.
This article is not intended to give legal advice for reverse mortgages, it is for informational purposes only.