An In Depth Look At Reverse Mortgages
The Reverse Mortgage Issue is picking up steam. I began covering this topic on our Real Estate Undressed and Mortgages Undressed blogs in 2006. I first posed the topic unsure of it but interested. In over a year of review I conclude, it can be a great help to many people. There is an FHA version that is somewhat restrictive. Like in regular mortgages, there are conventional and Jumbo Reverse Mortgages.
The one thing to watch out for is the fact the costs are high enough you should expect to keep the loan for 7 years or more. It is a loan.
You might find some recent comments interesting:
From Peter G Miller
I am not part of the reverse mortgage industry. I am a journalist and have certainly discussed the matter of negative amortization. As an example, I wrote on August 1st that:
“With all the news about failing lenders, you don’t hear much about problems with reverse financing.
“The reason: We’re not going to know how risky reverse mortgages are for a number of years.
“Reverse mortgages are really nothing more than negative amortization financing. Monthly payments do not cover the interest cost, so the unpaid interest is added to the loan balance. Of course, with a reverse mortgage there are no required monthly payments at all.”
My reverse mortgage blog — BestReverseMortgage.com covers reverse mortgages from an independent perspective and routinely discusses subjects not found on lender sites.
Craig Castle Says:
I think the term “risk” is the wrong one to use with regard to reverse mortgages. Because they are non-recourse loans, there really is no “risk” as such to the borrower. But, it is true that interest rates, which change, effect the overall cost of reverse mortgages.
You are correct to say that a reverse mortgage does not make sense for everyone, and that the length of time the borrower plans to remain in their home is an important consideration.
The truth, however, is that many older Americans have few other assets available to help ease financial problems. With residential real estate losing value over the last year, it is not a good time to sell. And those who do, will not find affordable rentals, either.
Reverse mortgages allow seniors to access equity without losing their place to live. By saving the cost of paying for other housing, they can often recover the cost of a reverse mortgage loan.
Peter runs a great website, I link to it as well, but I have to disagree with this comment… “The reason: We’re not going to know how risky reverse mortgages are for a number of years.” Yes, reverse mortgages are neg am loans but remember the lenders are only allowing seniors to take roughly 60% of the equity out of their homes. These arent the 90% LTV neg am loans that we have seen the past few years. It doesnt get much better than a 60% LTV loan with a Gov gaurantee even with neg am.
- Just my two cents……
- This would apply to FHA Reverse Mortgages
- Karen of Loan Smart Says:Never fear. Just attended the NRMLA (National Reverse Mortgage Lenders Association)conference in San Diego this month and heard from the director of HUD that they are working on decreasing the up front costs for a reverse mortgage. This product is one of the best things ever offered for seniors and can dramatically change their lives for the better.
Philip Vernot Says: With so many Seniors struggling to make ends meet combined with the adage “You can’t take it with you”, a reverse mortgage makes a lot sense for many of the Seniors today.
John of Reverse Morgage Daily Says Larry, The costs are higher with a reverse mortgage but remember half of the costs are due to the 2% MI premium which offers the borrower protection if they end up being updside down on the house. As the reverse market evolves you will start to see the origination fees become lower as lenders start to pay on the back end.
- Tom Evans Says:As Marketing Director for the Senior Lending Network, I have had a chance to speak firsthand with literally thousands of seniors who have taken Reverse Mortgages. In the overwhelming majority of cases, seniors have changed their lives for the better with a reverse mortgage. Many, in fact, go so far as to say that their RM “saved their lives”.I came into the mortgage industry from an entertainment background, and at first, I too thought that Reverse Mortgages were “too good to be true”. But to quote one of the testimonials from our latest campaign - “This is one of those things that IS good and IS True, and the government is backing it.”I was a skeptic, but I would proudly recommend a reverse mortgage to anyone in a position to benefit from it - even my own parents. Thanks………………………………..Click Here for those written on Real Estate Undressed.com …..and Here for those on MortgagesUndressed.com
