Okay. You knew it was coming. Here’s what we at Hermit Haus Redevelopment can do to help you if a reverse mortgage doesn’t meet your needs for any reason. You can sell us your house to generate a monthly income for a specified time (up to 3o years). In many cases, this contract may not interfere with Medicare benefits and can be inheritable, protecting your legacy. The big difference between this approach and a reverse mortgage is that you are selling your house.
- If you need to stay in your house, a reverse mortgage may still be your best option.
Being able to stay in your house is both the strongest point in favor of reverse mortgages and the reason reverse mortgages usually don’t make financial sense.
Now you may say this alternative sounds like owner financing the sale of your house. There’s a good reason for this feeling. It is owner financing the sale of your house, but don’t let that put you off. Owner financing has a bad reputation for two reasons:
- Owners historically have not performed enough due diligence on their buyers.
- Buyers who seek owner financing typically have credit problems.
These two conditions are additive. If you have both conditions in the same sale, you are almost guaranteed to have problems. The combination occasionally results in a non-performing mortgage, and the previous homeowner must take the uncomfortable step of foreclosing and taking back a property they thought was already sold.
Even though owner-financing problems are not nearly as common as most people believe, they do happen. When they do, the former owners are usually unprepared to deal with them, which is exactly why I recommend that most people not owner-finance their homes to just anyone.
But owner-financing your home to an investor like Hermit Haus, the situation is completely different.
- Our motivations for seeking owner financing are not related to a history of poor credit performance.
Rather we intend to make this a profitable transaction for all and need owner-financing to make it happen. Banking regulations limit the number of FHA-type mortgages an investor can have, and non-FHA mortgage can be very expensive to originate and hold. Plus they’re usually for much shorter time—often as little as one year, and paying 2-4% origination costs every year means the bank makes more money than the investor.
- We have the resources to keep making payments, even if the house goes vacant for a while.
And we have the resources to maintain the house. If you owner-finance to anyone, make sure they have a contingency fund set aside for ongoing maintenance.
- A third-party servicing company services the note.
If any problems ever arise, the servicing company will deal with them, not you, and we pay the servicing fees on top of the mortgage payments.You never have to worry about collecting late payments or even [shudder] foreclosing.
So, if you sell your home to an investor like us, you are turning your home into an asset that will generate income instead of a debt that grows with every dime you receive from the reverse mortgage company…that is, if you perform your due diligence on the investor. Next time, I’ll compare the two strategies to show which one make you more money.
Want to Learn More?
If you have questions, call us at 512-977-8077 and one of us will help you out.Hermann says please like and share!