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Are reverse mortgages really a good deal?
Due to financial changes in my life I am considering whether or not a reverse mortgage is all that the banks say they are or just another money-making banking scheme.
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| By
Christa C |
Posted on
06/30/06 Total Answers
8 |
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| Answers- |
| http://www.reversemortgage.org/ |
| Answer by :
Bella On Date
2006-06-30 16:31:23 |
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| This depends on your age. Many lending institutions will only do reverse mortgages to older people for a good reason. If you're young, the answer is no. |
| Answer by :
ginabgood1 On Date
2006-06-30 16:32:01 |
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| I don't know the details of the reverse mortgage, but from what I see on tv, I figure basically you are selling the house to the bank on time, and the longer you live, the more payments they have to make. But if you have to sign over papers, then that would be a scam. Because if you are old, which is what they advertise for, then all they are doing is buying the house for basically what you owe on it, and then wait till you die, then it's theirs to sell. It would be wiser to sell your house to a rental company for cash, with the agreement that you live there for a reasonable rent for the rest of your life, or until YOU chose to move. Ron |
| Answer by :
ronscott1951 On Date
2006-06-30 16:35:38 |
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| It depends on the terms of the loan. Typically, the note will not come due until the borrower moves out of the house, at which time the balance plus interest will become due. At that time, you can pay off the note or let the bank take the house. If the bank takes the house, then it will sell the house and use the sales proceeds to pay off the note. If there are surplus proceeds, then that goes to the borrower. If there is a deficit, then the bank may be able to seek collection from the borrower, depends on the terms of the loan.
If you don't have anyone to will your house to when you die, then maybe a reverse mortgage is the way to go. It's like selling your house but getting to live in it while you're still alive. But be very careful because I heard of one reverse mortgage where the loan was scheduled to become due on a set term, which I believe was 15 years.
You really need to read and understand all of the terms. You cannot assume that all so-called reverse mortgages are the same. |
| Answer by :
eddygordo19 On Date
2006-06-30 16:38:54 |
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| well, as you know, no product is offered by a financial institution that is not going to be profitable for them. Basically, they try to find a need to fill by a product they have. Thus, the reverse mortgage. Can be good for some, probably not for most. It really matters on what you need, and as with any financial decision, you may want to discuss this with a professional not affiliated with the institution. Usually a CPA or some other person looking over your finances is a good choice.
My understanding is that a reverse mortgage is useful for someone with a property that they own outright, with no liens against it. Basically, the institution gives you a monthly payment balanced against your home. As time goes on, their ownership of your home is increased on the payments they have made. If the home was sold or refinanced, they would be paid back out of the proceeds, with their interest of course. Same thing if you pass away; the balance would need to be satisfied.
You may be asking, who wants this? Well, it is marketed at the elderly. They may be in situations where their retirement and/or pensions are not doing it, and they have no assets except for their home. Could be good, could be bad, which is why you would want to consult a professional. |
| Answer by :
Raidered81 On Date
2006-06-30 16:48:06 |
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| Reverse mortgages are fine if you are old, and you know you are going to die. If you live long enough to use up the reverse, you could end up homeless. and by then you will be old. Homeless and old is not a good thing. |
| Answer by :
bluepeahen On Date
2006-06-30 16:48:57 |
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| It all depends on you So have a look...
A reverse mortgage is a special type of loan used by older Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the financial security they need to fully enjoy their retirement years.
Many of the same costs that someone pays to obtain a home purchase loan, or to refinance their existing mortgage, apply to reverse mortgages too. You can expect to be charged an origination fee, up-front mortgage insurance premium (for the FHA Home Equity Conversion Mortgage or HECM), an appraisal fee, and certain other standard closing costs.
In most cases, these fees and costs are capped and may be financed as part of the reverse mortgage. Below is a more in-depth explanation of each type of fee.
Origination Fee
The origination fee covers a lender's operating expenses—including office overhead, marketing costs, etc.—for making the reverse mortgage.
Under the HECM program, which accounts for 90 percent of all reverse mortgages made in the U.S., the origination fee is equal to the greater of $2,000 or 2 percent of the maximum claim amount (i.e., county FHA loan limit). Currently, the FHA loan limit varies from a low of $200,160 (for rural areas) to a high of $362,790 (for high-cost metropolitan areas). Therefore, the 2 percent origination fee generally ranges between $4,003 (2 percent of $200,160) and $7,256 (2 percent of $362,790).
Home Keeper borrowers are charged an origination fee that may not exceed 2 percent of the value of the home. With either product, the entire amount of the origination fee may be financed as part of the mortgage.
Mortgage Insurance Premium
Under the HECM program, borrowers are charged a mortgage insurance premium (MIP), equal to 2 percent of the maximum claim amount, or home value, whichever is less, plus an annual premium thereafter equal to 0.5 percent of the loan balance.
The MIP guarantees that if the company managing your account – commonly called the loan “servicer” – goes out of business, the government will step in and make sure you have continued access to your loan funds. Furthermore, the MIP guarantees that you will never owe more than the value of your home when the HECM must be repaid.
Appraisal Fee
An appraiser is responsible for assigning a current market value to your home. Appraisal fees generally range between $300-$400.
In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety codes, in order for the reverse mortgage to be made.
If the appraiser uncovers property defects, you must hire a contractor to complete the repairs. Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. The cost of the repairs may be financed in the loan and completed after the reverse mortgage is made. Appraisers generally charge $50-$75 dollars for the follow-up examination.
Closing Costs
Other closing costs that are commonly charged to a reverse mortgage borrower, include:
Credit report fee. Verifies any federal tax liens, or other judgments, handed down against the borrower. Cost: Generally under $20
Flood certification fee. Determines whether the property is located on a federally designated flood plane. Cost: Generally under $20
Escrow, Settlement or Closing fee. Generally includes a title search and various other required closing services. Cost: $150-$450
Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items. Cost: $75-$150
Recording fee. Fee charged to record the mortgage lien with the County Recorder's Office. Cost: $50-$100
Courier fee. Covers the cost of any overnight mailing of documents between the lender and the title company or loan investor. Cost: Generally under $50
Title insurance. Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against any loss arising from disputes over ownership of a property. Varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance.
Pest Inspection. Determines whether the home is infested with any wood-destroying organisms, such as termites. Cost: Generally under $100
Survey. Determines the official boundaries of the property. It's typically ordered to make sure that any adjoining property has not inadvertently encroached on the reverse mortgage borrower's property. Cost: Generally under $250
Service Fee Set-Aside
The service fee set-aside is an amount of money deducted from the available loan proceeds at closing to cover the projected costs of servicing your account.
Federal regulations allow the loan servicer (which may or may not be the same company as the originating lender) to charge a monthly fee that ranges between $30-$35. The amount of money set-aside is largely determined by the borrower's age and life expectancy. Generally, the set-aside can amount to several thousand dollars.
(Note: The servicing set aside is just a calculation and not a charge. The only amount added to your loan balance is the monthly servicing fee, which ranges from $30-$35.)
If you are looking for a Lender for reverse mortgage you can click on the link below
http://www.reversemortgage.org/Default.aspx?tabid=255 |
| Answer by :
Mohit Madaan On Date
2006-07-01 21:16:04 |
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| 'm sorry but there are many misconceptions out there about reverse mortgages. Many of them are listed by some of these replies. Yes they are real.
They were set up by FHA and heavily lobbied by AARP in order to help Senior citizens because they know that social security and pensions do not cut it for a lot of people.
I recommend going to aarp to find some really helpful information.
http://www.aarp.org/money/revmort/...
or here for the most frequently asked questions..
http://www.griffinloans.com/faqs.html...
There really is only one downside to taking out a reverse mortgage. The children are not left with 100% of the value of the home for an inheritance. From my experience and my own personal view, most children would want their parents to live their life to the fullest and don't care if part of their inheritance is reduced. It is YOUR home and you worked hard to pay for it. You should enjoy the benefits of it.
The house is still in your name it just shows that there is a mortgage on the home like any other conventional mortgage. You can take the full amount in a lump sum, split it up in monthly payments or leave it in a line of credit which right now has a growth rate of about 7%. With the line of credit you are only charged interest on what you pull out of the line of credit and that interest rate right now is right around 6.5%. The rest of the money sits there untouched until you need it. These loans are set up so that there should always be equity in the home to pass along to your heirs. Also, you can repay the loan at anytime with no prepayment penalty.
All of this money is tax free and there are no monthly payments to make. You CAN make a payment if you want and are concerned about keeping the balance down. You even get a tax break if you pay back the interest you are being charged.
This is a much better option than a home equity loan which you have to make high monthly payments and if something happens and they get behind could lose their home. With an FHA reverse mortgage there is NO way to ever lose your home or be foreclosed on.
So really the only downside to reverse mortgages is that the heirs wouldn't get 100% of the home value for your inheritance.
I'd be happy to send you some more information if you would like. This is what I specialize in and our company can do reverses almost anywhere in the country. If you would like some more information please email me at bburns@griffinloans.com |
| Answer by :
bburns31 On Date
2006-07-02 19:10:10 |
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