Wisconsin Reverse Mortgage: How Do Reverse Mortgages Work

Perhaps you find yourself in a very precarious position like a couple of seniors I just helped. I have known a few retired persons who came to me for help because they could no longer afford to live the retired life. By that I mean this. One had condo fees adjust much higher than what it originally was. Then with increased gas prices, general inflation etc. could no longer live on her small social security check and husband’s pension. She was not alone. Another couple came to me because property taxes had risen dramatically the last few years. They too were feeling the pinch of the increased prices and had to work part time bagging groceries to make ends meat. Both of them had social security but that no longer covers much. The sad thing was both of them had done everything correct and paid off all their bills and only had small or no mortgages and car payments left. They both felt it was a hopeless situation and they would have to sell their houses or work forever.

I made a recommendation to them that they should consider a Wisconsin reverse mortgage. I said they are equity rich and cash poor and this might help them with extra income every month for a long as they live in their house. Let me give you a very brief explanation of Wisconsin reverse mortgages. A reverse mortgage allows seniors, 62 and above, to pull cash out of their homes without making any payments. As the name implies a reverse mortgage is opposite of a regular mortgage. Instead of borrowing a sum of money and paying it back to reduce the debt to nothing; a Wisconsin reverse mortgage is getting a sum of money but no payments are made and the debt grows larger over time.

The equity can be pulled out in a lump sum or paid out gradually over time in guaranteed monthly payments. The unpaid interest is added to the reverse mortgage balance each month. Since there are no payments made while the borrowers live there, the loan is only paid off when the home is sold or the owners have passed away. How is the amount of the Wisconsin reverse mortgage calculated? It is determined by four factors:
* The value of the house (fair market value).
* The age of the homeowners (both must be over 62).
* The interest rate the mortgage is qualified at.
* The maximum loan limit of the county you are living in.

The amount that is guaranteed to the homeowners is calculated based on the life expectancy of the borrowers. The loan to value ratio is calculated so home owners won't outlive their equity. The older you are when you take the loan out the more you will get. For example, a sixty two year old borrower with 250,000 in equity could borrow about 110,000 on a reverse mortgage, while a seventy six year old borrower with the same equity would get about 149,000.

It can get a little complicated so it is important to work with someone who knows what they are doing and specializes in Wisconsin reverse mortgages. This is a very popular tool that many seniors are taking advantage of. If you are cash poor and equity rich I would recommend looking at this option to see if it is right for you.