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I am aware of the concept of this type of mortgage but I want to be completely aware of all the disadvantages.

My elderly mom is thinking of getting a reverse mortgage on her home. I would like to know if anyone has any experience with this kind of mortgage. What should she be aware or cautious of (hidden obstacles, etc.)?
Is this type of mortgage regulated “strickly” by the government or can there be other types of reverse mortgages, etc.?
Since my mother worries from day to day if she can pay even pay her utilities on her small Social Security check I would much rather see her have some “peace of mind” than any profit from the sale of her home once she is gone.
I didn’t think a reverse mortgage was a “loan.” I thought that you are given the appraisal amount for your home in $ $ ‘s and you are allowed to live in the home until you pass away because your home is no longer yours but the money you are given for it can be spent on many things, bills, vacation, etc. Obviously I need to read up on it some more…

4 Thoughts on Anyone ever gotten a “Reverse Mortgage.”?
  1. Reply
    Sheila
    February 1, 2014 at 5:14 am

    Disadvantage, there goes your inheritance. (the house you would have sold when she passed)

  2. Reply
    Miss V
    February 1, 2014 at 5:53 am

    I’m familiar but haven’t done one. Look at the AARP website below.

  3. Reply
    oneil_den
    February 1, 2014 at 5:58 am

    My dad had a reverse mortgage through Freedom Financial. At the time I did not know anything about reverse mortgages but he had been to several of their presentations in 2003 and decided to take a reverse mortgage to pay off his bills and give him extra money since he was retired and on a pension. After he passed away in 2005 I found the loan agreement. As I remember the original loan fees were around $ 10,000.00 and the fees when he borrowed against the loan were about $ 300.00. He did not have to pay anything back up to the amount of the loan but as I recall he had borrowed about $ 55,000.00 against the loan. I do not remember the total amount he could borrow against. The loan could be immediately called when he died but we explained to a rep at Freedom Financial that we could pay off the loan at settlement after we sold the house. My dad died in January and we sold the house and went to settlement in April and paid off the loan. I think that this type of loan is a good product but I think you should help your mom shop around to get the best deal, ask lots of questions and be an integral part of the process. You may even want to consult an eldercare attorney or a financial adviser. The cost may be well worth it even if you have to pay for the advise yourself. Your mom like my dad may not want you snooping too deep into her finances but in the end you will be the one responsible for making sure the loan gets paid back. Good luck.

  4. Reply
    Les Ismore
    February 1, 2014 at 6:10 am

    I spent a lot of time looking into reverse mortgages for my mother (we decided against). I put my thoughts about it down here, if you’re interested: http://www.reverse-mortgage-information.org/is-a-reverse-mortgage-right-for-me/

    1. What should she be aware of?

    She should be aware:
    – that the costs for reverse mortgages are relatively high (closing costs, mortgage insurance, etc.)

    – that to amortize these high costs and make the reverse mortgage a sound financial deal, she will need to remain in the home for at least 5-7 years. If she dies or moves out sooner, it will have been a very expensive way to borrow

    – that the amount she can borrow depends largely on her age (older homeowners can get more) as well as the value of her home. As a % of home value, she may not be able to borrow as much as she wants. Be sure to check out one of the many online RM calculators to get a feel for the amount she’ll be able to borrow, fees, etc. Here’s one: http://nrmla.edthosting.com/index.asp

    – that the amount she borrows (and interest thereon) will reduce the amount of any bequest.

    – that reverse mortgages are complex and require the borrower to do a fair amount of homework. She’ll be required to attend a formal counseling session. Don’t make the mistake of blowing this off. It’s the best chance you get to have questiuons answered and ensure you understand things.

    2. Types of reverse mortgages.

    The most common type of reverse mortgage is the HECM (home equity conversion mortgage), insured and regulated by HUD/FHA. HECMs are the best deal around for “average guys” with homes valued $ 400,000 or less.

    Private lenders have developed programs for higher valued homes with a bunch of different confusing options.

    In the right situations, reverse mortgages can be wonderful tools to help retirees improve quality of life.

    One thing to watch for: the best HECM deals right now have interest rates with a 1% margin. But some lenders still push more costly 1.5% or 1.25% margin loans. Avoid these.

    Added:

    A reverse mortgage is very much a loan. The difference is you are not required to pay back principal or interest until the homeowners passes away or sells the home. The nice part is you never owe more than the value of the home.

    From the sound of your Mom’s situation, a RM may be nice fit for her.

    Good luck.

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