Weekly Scenario


My wife and I recently looked into doing a reverse mortgage, but were told we don’t qualify for enough to pay off our existing mortgage. Do we have any options?


This situation is called “short to close,” and it refers to the exact scenario you are encountering, namely one in which your current “forward” mortgage is too large to be paid off by the proceeds from the reverse mortgage.

You do still have options. The most common solution is to bring money to closing to cover the shortfall.

Here’s an example in real numbers:

John and Dianne are each 64, and their plan is to retire within the next 6 months. Their home is appraised at $400,000, and they owe $203,000 on their current mortgage.

Assuming current interest rates and average closing costs, the amount they qualify for leaves them about $5,000 short of what they need in order to fully pay off their forward mortgage.

They are allowed to bring that $5,000 to closing in order to make the reverse mortgage work. The funds to cover the shortfall can come from any non-loan source, including savings, sale of an asset, or a gift from adult children.

And what is the benefit of doing this? The obvious benefit is that they have no more monthly mortgage payment. Since most Americans’ largest monthly expense is their mortgage payment, eliminating that expense frees up a significant amount of money on a monthly basis.

But there are side benefits as well, including safeguarding the home in the event one spouse dies and the surviving spouse loses the retirement income generated by the late spouse. Even with the loss of income, no payment on the loan is due until the last person on the home title moves, sells the home, or dies. At that point the heirs have up to one year to decide whether to sell or to refinance the home.

If you have reverse mortgage questions, give me a call. I always love hearing from you.


Laurie MacNaughton [NMLS# 506562] is freelance writer and Reverse Mortgage Consultant with Middleburg Mortgage. She can be reached at 703-477-1183, Direct, or at Laurie@MiddleburgReverse.com

Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA ∙ 703-477-1183 Direct Laurie@MiddleburgReverse.com www.MiddleburgReverseLady.com


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