A Reverse Mortgage Can Be An Asset Protection Tool
Most of you reading this article are probably already familiar with the basic mechanics of how a Reverse Mortgage Chicago works. You own a home, have a lot of equity and you borrow against that equity; and for all practical purposes you don’t have a mortgage payment every month. Sometimes you get a lump sum of cash when take out the Reverse Mortgage, and sometimes you receive a monthly payment for as long as you live in the home.
Mechanics Of Reverse Mortgage Chicago
What most of you don’t understand are the title mechanics of the Reverse Mortgage Chicago. A Reverse Mortgage Lender like some borrowers and their families are concerned about what if the property is not taken care of. A Reverse Lender like some of its borrowers and some of the borrower’s heirs have other concerns. What if the borrower has to go in a nursing home?
Home Repairs And Contractors: Reverse Mortgage Chicago
Basically, homes that need to modernized, or repaired are good candidates for home improvement contractors to make sales to. Seniors are often less capable of completing home improvement projects on their own than younger homeowners. There are some home improvement contractors who are quite aware of this. Some of these home improvement contractors are unscrupulous and will take advantage of this fact. This is a big concern for a mortgage lender.
Assets Of Seniors
As seniors get older they may have to have assisted living and enter a retirement home. Many of these retirement homes are state run or are not covered by insurance companies. What happens then is the assets of the senior entering into assisted living arranges are attached by a nursing home or state assistance agency. This home may be the only, or the largest asset the senior has.
Reverse Mortgage Chicago Lenders
A Reverse Mortgage Lender is quite aware of these two common situations that occur to seniors and their heirs. The home could be at risk. Reverse Lenders are concerned with protecting the house. Ironically, the Reverse Mortgage Lender refers to the appraisal of the home as the Claim. In the end everyone comes to Claim the house.
Liens On Reverse Mortgage Chicago
A Reverse Mortgage Lender actually puts 2 liens on the house. The first lien the Reverse Mortgage Lender records on the house is for the maximum amount of principle loan amount that can be drawn against the property. To over simplify this, this lien is pretty much your Reverse Mortgage. The second lien the Reverse Mortgage records against borrower’s home is for the claim. So basically whatever the home appraises for the Reverse Mortgage Lender records a second mortgage against the property for. As a matter of fact, they record the second lien for 110% of the Claim Amount or Appraised Value with a cap of $625,500.
So if the senior is the victim of an unscrupulous contractor or has to be placed in a nursing home, and these kind or any other kind of debtor tries to attach a lien to the borrower’s home, these creditors at the very best would be in 3rd position. What this means is their will be a 1st mortgage, and a 2nd mortgage on the property. Any lien thereafter will be in 3rd position. Furthermore, a future creditor’s lien will be on a property with 2 liens recorded on it that are at 110% of what the property is worth. The 3rd, 4th, 5th, or 6th lien will have no equity position. Many would consider such liens worthless.
The senior will still have to cover their real estate taxes and pay their property insurance. However, any future creditor that try to place liens on the seniors asset or property will think twice.