quote:
And whats the issue with that?

Please enlighten me on why this is a last resort loan
Youbare just the typical doom and gloom guy who doesnt know how the loan works

You can just admit that

Like the previous guy, I don't know all the terms of a RM. Once the bank pays the value of the house, does the bank get to foreclose on the house or assume ownership? Are you allowed to live in the house once the bank pays for it? What happens to the appreciation of the property in the time the bank is making payments. I'm guessing the bank owns the appreciated value as well?

My objection is that the OP didn't really give a compelling reason to reduce equity. Wanting to "live better in retirement" is a reason of sorts, but assuming an extra grand moves the needle for the OPs situation, it sounds like it's more of a paycheck to paycheck situation and leaves no room for error or medical situations which inevitably come up in retirement.

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Posted by SDVTiger

Cabo San Lucas

Member since Nov 2011

74935 posts

Posted on 10/12/23 at 10:59 am to WhiskeyThrottle

quote:
Like the previous guy, I don't know all the terms of a RM. Once the bank pays the value of the house, does the bank get to foreclose on the house or assume ownership? Are you allowed to live in the house once the bank pays for it? What happens to the appreciation of the property in the time the bank is making payments. I'm guessing the bank owns the appreciated value as well?

Well the concept it basic
They are only loaning about 30% in the OPs case cause of age and rates
Its a life loan so it never ends

Concept. Borrower has a 100k loan. Value 300k
Differed at 7% now thats 583 a mnth payment or 7k a year. Pay it dont pay it you have the option. Yes it compounds.

If value is 300k and he gets national average the last 100yrs which is 3.6% or something his value grows by 9k

Out pacing the differment. So the loan shouldnt be more than the value ever.

Its a life loan so there is no term its a non recourse so if loan is more than value you can throw the keys back to the bank. Heirs as well. You always own the equity cause you can sell or refi out at anytime

If said person dies heirs have plwnty of time to sell, pay it off or rwfi into their name

The title is always in borrwers name or trust

Loan also has a credit line option with a growth rate at about 10% right now on money not used

So if borrower has 100k access doesnt use is at the end of 12mnths they will have 110k access

Fixed rate doesnt have that option and sometimes you leave money on the table cause it doesnt give you the availability after 12mnths

To answer the doom and gloom MI is .5%
Its an FHA loan so they charge i think 2.25% on the value upfront and. 5% monthly

Originators can charge up to 6k in fees so grind that down, title/escrow, interst are the fees.

You can also escrow taxes/insurance for life with a LESA or if you have shitty credit it will be forced if you dont have a good reason for blemishes

The lesa in OPs case is held back for 20yrs so it could potentially kill the deal