Posts Tagged reverse mortgages
In a Journalistic World Full of Opinions on Reverse Mortgages, Where is the Truth?
Posted by Anne Johnson in Finances on 02/08/2010
One month into the year 2010, many people have heard at least something-good or bad- about reverse mortgages. This product has become extremely popular in the last couple years and its popularity continues to rise. However, with popularity also comes criticism. Every article that is published seems to be a minimal amount of information clouded by a storm of opinions.
Although this product is different from any currently on the market, reverse mortgages are a still lien on a person’s home, just like traditional mortgages. Unlike traditional mortgages, a reverse mortgage does not require a person make monthly mortgage payments for as long as they live in the home.
Reverse mortgages are used so homeowners over the age of 62 can pay off their existing mortgage and obtain access to additional funds. Once a homeowner has taken out a reverse mortgage, they will never have to make a monthly mortgage payment again. This federally insured product does require that the homeowner remain current on real estate taxes, homeowner’s insurance, and home repairs. Provided that the homeowner maintains his obligations, the reverse mortgage will not become due until the homeowner moves away or otherwise vacates the home. If the homeowner fails to meet these obligations, the reverse mortgage could become due and payable before the homeowner leaves the home.
The federally insured reverse mortgage does have costs associated with it, just as all financial products do. Most of the up front costs associated with the product go directly to the government so that the reverse mortgage remains a non-recourse product. It is considered non-recourse because, assuming the homeowner continues to respect his contractual obligations, he will never owe more than the fair market sale value of the home.
Reverse mortgage benefits can help people who cannot comfortably afford their mortgage payments, health care, and daily expenses. Important to note is that this product is something which should be discussed with the homeowner’s heirs. In order for the home to remain in the family after the homeowner has passed away, the estate will be responsible for paying off or refinancing the reverse mortgage. This loan should not be considered if a homeowner wishes to leave a mortgage-free home to their heirs because it is a loan and does need to be repaid.
It seems that some critics are unclear on many important facts about this loan. The fees can be a little higher than traditional mortgages, but the interest is not. Also, the largest fees go directly to the government for insuring the reverse mortgage, not to the banker to make a quick buck. For homeowners who could use this product, the benefits strongly outweigh the costs.
There is a lot of misinformation surrounding reverse mortgages. This product is not right for everyone, but also should not just be used in the case of last resort. It can greatly help senior homeowners enjoy their retirement and the protections surrounding the mortgage continue to improve. Hopefully, the product will be around for many years to help seniors without enabling anyone to take advantage of them.
As a former psychology major, finding solutions to resolve people’s problems has always been a subject of interest to me. I hope that my writing will give people the knowledge and confidence to make important decisions about reverse mortgages. In addition to writing, I love to read, knit, spend time with friends and family, and watch the Missouri Tigers and Green Bay Packers!
Reverse Mortgages – 4 Things That Can Sneak Up on You
Posted by Neal Coxworth in Finances on 02/04/2010
You may have seen a lot of advertising these days about Reverse Mortgages. Usually the ads are targeted at Senior Citizens and going for the favorite angle of financial services companies letting us know that reverse mortgages provide “piece of mind”.
1.) So, what exactly is a reverse mortgage? A reverse mortgage is a way to receive monthly income from a financial service provider using your home. People who rent cannot get a reverse mortgage. Instead of you paying the bank a monthly mortgage payment, they instead pay you a monthly payment in exchange for equity in your home. In exchange for these monthly payments, the bank puts a lien on the home in the amount of the total disbursed to the owner of the home. Additionally, there can be restrictions based on the location of your home.
Some things to remember are this:
- You must have a considerable amount of equity in your home to qualify for a reverse mortgage. Don’t even consider it if you owe 70% of the value of your home or more.
- Most programs have an age limit stating that you must be at least 62 years of age to apply.
- You will pay interest on the amount disbursed to you, just like a traditional mortgage.
- Upon the termination of the mortgage, either at the owners death or when no longer needed, the mortgage must be paid off like any other loan. This usually done through sale of the house. In a declining Real Estate market, this is an important factor to consider, as many reverse mortgage recipients may have very little left after the settlement of the mortgage debt.
- Reverse mortgages are always in the first position. This means that if you have a seocnd mortgage, it will need to figured into the calculations to see if you qualify for the reverse mortgage.
2.) These mortgages have become popular for a number of reasons. One of the biggest is that the baby boom generation ages, many do not have enough income to cover their expenses without having to leave their longtime homes. As the era of corporate “pensions” fades into history, these baby boomers are caught in a very bad position, and a reverse mortgage can help plug the income gap. Many times reverse mortgages are also used tocover unexpected medical expenses that aren’t covered by insurance.
3.) Because the marketers of these products often target the elderly, there is always an element of extra caution that is needed if you or you loved ones are considering this as an option as some of the tactics used to get people involved are very aggressive and may not disclose all the pitfalls.
4.) As the saying goes, most Americans biggest asset, especially later in life, is the home that they own. A reverse mortgage can drastically alter the financial picture of someone who may have spent a lifetime building a financial nest egg that could potentially be destroyed by using such a product. The key is for the person signing the mortgage to completely understand the terms before closing.
For a link to a reverse mortgage calculator, or any other questions, email us at viceroy@lifeloansfreeinfo.com or go to the link below.
Neal Coxworth is an entrepreneur and a 17 year veteran of the consumer credit industry with experience in originating, underwriting and processing mortgage, student and consumer credit loans. He publishes an informational blog for consumers at http://www.lifeloansfreeinfo.com