My parents are 80. They have a reverse mtge on their hou se with a small plot of land attached to it. ?

Question

They say it is married to their house. Anything built there must be attached to their house. There is no money to build, but I say, get a builder to build a small building and rent it out as a day care facility for an additional income. Can this be done, if so, how?

Answer 1

Is the small plot of land on the same legal parcel as the house?  If not, it might be possible to have the lot split (apply at your city or county planning department).  It might be necessary for the company holding the reverse mortgage to agree, but they should allow it so long as they don't see the change as decreasing the value of the property too far.

Answer 2

You need to speak to a real estate attorney in your state.  You do not say what state you are from.  Different states have different laws in relation to this issue.  Do this soon - as your parents are aging.

Answer 3

Most reverse mortgages are secured by one parcel of land.  Unless this loan is what is called a "proprietary" loan such as those that Financial Freedom funds, then there could be a chance that the separate parcel is free of liens, more specifically their reverse mortgage.

The only way to be sure is to look at the loan documents that your parents signed for the reverse mortgage.  Look at the promissory note (or just note) and the deed of trust.  In them, you will find an area that has your parents' street address followed by a legal description (a way that your county locates and describes the property).  Compare that description with the original grant deed(s) that your parents have when they bought or acquired the home.  If this is too complicated for you, contact either a loan officer or real estate agent in your area and they can look up the information.

Given the fact that your parents were able to get the reverse mortgage, chances are that there is plenty of equity left in the property.  If this is still the case, your parents can refinance into another reverse mortgage.  This method will be best on or around October 1st (or January 2009), because that's when HUD (FHA) will enact the revised programs for reverse mortgages allowing for higher loan amounts and lower costs.  This was part of the Economic Recovery Act of 2008 signed by President Bush a few weeks ago.  FHA will impose a maximum lender fee significantly lower than those of the past.  

You won't be able to find this information over the internet yet, but come the next few weeks you will and there will be a plethora of lenders advertising this information.    

Answer 4

.   Not with the reverse mortgage.  You would have to pay cash to build and even that building might be covered by the mortgage.  YOu don't want that.

Answer 5

If the "small plot" is not included in the reverse mortgage, you are free to do anything you want on it.  It's no different from you having a plot in a different state.  But you may have to check with authorities for zoning, building permits, and any other codes./