3 Thoughts on Any comments on reverse mortgages? Pro/Con?
  1. Reply
    Brian G
    June 13, 2013 at 3:27 am

    Pro: you get a steady income from the time you sign the papers until you die.

    Con: When you die, the house is going to the mortgage company, not your estate. If you plan on leaving the house or money from the sale of your house to someone in your will, forget it.

    Con: You no longer have equity in the house you could use in a pinch.

  2. Reply
    June 13, 2013 at 4:10 am

    They can be great, but they’re not for everyone.

    The best product, by far, is the HUD-back Home Equity Conversion Mortgage (HECM).

    They have fairly high upfront fees. 2% upfront mortgage insurance. 2% origination fee. Closing costs and taxes based on the maximum future loan balance. Monthly service fee is $ 35, charged over and above the interest charges.

    You can get a line of credit, lump sum of money, or an annuity check monthly. Or a combination of these options.

    They don’t work so well if you owe a bunch against your house, and the younger you are, the less money you will get (longer life expectancy means more time for interest to accrue).

    But, you’ll potentially never have to make a housing payment again, except your taxes and insurance. And credit and income don’t matter. The only thing that counts on qualifying is being old enough to qualify at all, and having sufficient equity.

    The biggest provider of these is Financial Freedom, though many brokers sell to them as well (myself, for example). I believe there’s zero difference in rates and costs going through either.

    Once you apply, you MUST meet with a certified reverse mortgage counselor before anything can be done to even process your loan. This is the time to ask or re-ask any and every question you still have after talking with your lender. It’s a protective measure instituted by HUD after there were some really bad reverse mortgage products that were sold in the 80’s (long gone now, but this measure is still in force).

    The bank will NOT simply own your home when you die. Common misconception. The loan will, of course, have to be paid off. But it’s up to the heirs how that happens. If there’s equity, it’s yours to get if you sell. If the loan exceeds the value of the home, that’s when you hand it over to the bank and they take the loss. Which is what that 2% upfront insurance fee is meant to cover.

    So, in summary: They can be great. They’re not for everyone. They aren’t appropriate unless you will be in that property for a long, long time. They require lots of thought, lots of questions, and some mandatory counseling.

    So go find out if you even qualify, and for how much. If you do, get the counseling and make your decision after that.

  3. Reply
    June 13, 2013 at 4:53 am

    Reverse Mortgages are a fantastic product and serve many needs. Such as supplementing retirement income, paying for healthcare, home repair or modification, fund long term care insurance, reduces estate taxes, help fund a grandchilds education, and more. But as the saying goes we don’t live in a one size fits all world. What may be great for your neighbor, may not be great for you. The question becomes what are your needs and how will a Reverse Mortgage meet those needs. Up until 4 months ago it really didn’t matter who you talked to about Reverse Mortgages as they were mostly the same. One product offered by a few major players. Well that is not the case today as there have been many additions in the last 4 months. The Home Equity Conversion Mortgage (HECM, Govt. Insured) was and still is the most popular, accounting for 90% of Reverse Mortgages. But they now come in three flavors…the HECM150, HECM 125 and the HECM 100. Not to mention variable rate and fixed rate. There are also “Jumbo” Reverse Mortgages, both fixed and variable. What I’m saying Rick, is 4 months ago whether you talked to me or the broker down the street, everything was the same….basically one product (HECM 150) with rules set by the Feds.
    What you want to find in your area is someone who has experience, knowledge, and accessibility to the diffent products and who will sit with you and figure out which if any works best for you and your needs. If your in Massachusetts, New Hampshire, Florida, I can be of assistance….if not I’d be more than happy to be a resource for you to check any information you receive.

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