Reverse Mortgage options for people under 62?

Circle Lending has just released a program called Family Advantage (TM)  which  they are saying is their smarter version of a reverse mortgage.  They describe it as a line of credit funded by the relatives or friends of a homeowner which is secured by real estate.  The Family Advantage program program retains the advantages of conventional reverse mortgages and eliminates many of of their costs, restrictions, and drawbacks.  So what are the advantages?

  • No age restrictions
  • No lending limits
  • Can be made on 2nd Homes
  • Flat fee of $3,999 instead of the typical 2% origination fee
  • Servicing fee of $19

According to Asheesh Advani, CEO of Circle Lending, “it enables the homeowner to receive cash knowing that a relative or friend – not an institution – is building equity in the house”.  My question is how is the friend or relative building equity in the house when they are still going to have to pay off the line of credit when the homeowner moves or passes away?  Also, what happens if the house loses value and the proceeds from the sale are less than the amount of credit that was extended?  I wasn’t able to find anything that said that this was a non recourse loan like the standard reverse mortgage.

I give Circle Lending a lot of credit for trying something like this but it almost seems to good to be true.  If anyone has more information on the program please send it my way.  Below is a link to the press release.

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A new twist on reverse mortgages: Yahoo Finance

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  • You can fill out you info on their site and download the product brochure …. but after reading it, sounds like Circle is just a doc preparer and servicer. I would assume the family or friends could do a HE loan to pull out the equity required to pay off the loan. Sounds like from the brochure Circle is leaving it up to the lenders (family, friends) to decide if they want to lend up to and over the value of the house. Of course, they recommend only going to 70%. Since you are essentially paying yourself back after the loan is over, I would think you either decide to eat it or find some other money. Seems kind of confusing … I would think family or friends could do something like this without Circle Lending in the mix.

  • If you are loaning money against the property, and the owner dies, and you’re the relative that gets the house, your loan simply turns into equity. And, you pay no one back.

    If another relative is lending the money, and you inherit the property you’d have to pay the money back to the relative…..just like you’d pay off any other reverse mortgage.

    If you inherit the property, you’d pay off any loan that is on it, so you are not diminishing your inheritance if you are also the lender.

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