Stupid Question on Reverse Mortgage

Posted By: Rdy2Retire

Stupid Question on Reverse Mortgage - 07/12/12 05:31 PM

I am clueless when it comes to how all of the "ins and outs" of Reverse Mortgages work. Am being asked if we can do a HELOC behind one. Is that allowed? Is it even possible?
Posted By: KPOC

Re: Stupid Question on Reverse Mortgage - 07/12/12 09:11 PM

I'm no expert on reverse mortgages either, but I think the question is: why have a HELOC? A reverse mortgage is essentially an equity loan (I think they can even be structured as equity lines) that don't require monthly payments. In other words, they accomplish similar things, allowing the borrower to tap the equity in his/her home. If you allowed a HELOC also, you would be making payments to the borrower (through the reverse mortgage) and they would be using it to pay you back (the HELOC). I don't see the point. Again, I'm no expert though.
Posted By: Rdy2Retire

Re: Stupid Question on Reverse Mortgage - 07/13/12 04:14 PM

Thanks KPOC. Here is what a regulatory agency that we use stated and is pretty much what I was trying to figure out.

"When you do a HELOC behind a reverse mortgage, at the time it is made there will be equity in the home, but that equity will be depleted with time because the interest that accrues on the reverse mortgage is not paid but is added to the principal which will increase the balance on the first mortgage."

So would not be advisable to do a HELOC behind a reverse mortgage!