By Admin on Sep 8, 2010 in Financial Services
I’m a little overwhelmed with all of the information out there on reverse mortgages. The main thing i want to know, is how we pay back the loan – how often, etc.
Thanks in advance for your help!
So many reverse mortgage questions!?
What is Reverse Mortgage, How does reverse mortgage work, Advantages & Disadvantages of reverse mortgage.
The reverse mortgage program was set up by the Federal government to let elderly people with lots of home equity access that equity to have more money to live on. It was a way of counteracting the effects of inflation on pensions for really old people who didn’t have many assets other than a home.
The programs are not for everyone. They do have large fees. But if you are 75-80-85, on a fixed income, do not care if your children get the money from your house (or don’t have children), and need more money to live on, a reverse mortage may provide you with more monthly income. For example, a single woman, 70, with no income but SS but $80,000 equity in her house, could draw a lumpsum or monthly income for the rest of her life. It may not be a large amount, but it might make ththe difference between skimping and living a normal life.
When you move permanently or die, the house will be sold and the loan repaid, then anything left will be distributed to your heirs.
This is NOT a bad program. It just isn’t for everyone. My husband and I have no children, we own our house outright, our siblings are all college-educated and don’t need money, and we are planning to use a reverse mortgage in our 70′s or 80′s if, say, we have large medical bills that would otherwise bankrupt us. So there IS a place for reserve mortgages, just not for everyone.
Susie T | Sep 8, 2010 | Reply
Everthing I have read about reverse mortgages is bad.
Yet, there are so many companies pushing them.
Just like they are still pushing ARM mortgages.
Banks have no mercy in how they are ruining people’s lives.
If you make a reverse mortgage you must realize that when you decide to move out of your home at 80 you will have NOTHING to your name.
At 80 you may no longer want to live in a big house and mow the lawn.
You will want to move out.
Your children will know that you have nothing to your name, so they may not take you.
You will not have a penny equity to your name.
You are better off just selling your home and moving to a nice small place now.
Remember the number one goal in life is to have no mortgage when you retire.
A reverse mortgage is exactly the opposite of that.
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Judy | Sep 8, 2010 | Reply
jReverse mortgages have high fees up front. Some companies offering them pressure the person to then invest the proceeds with them in totally inappropriate vehicles.
There may be good information available at http://www.AARP.org. Give that a try. Keep reading and asking questions. Don’t apply for one until you understand all the clauses and are sure it is right for you.
Sharon T | Sep 8, 2010 | Reply
The first thing to realize that a RM is not for everyone! It is for people who already have 90% to 100% equity in their homes. They can opt for a monthly payment to be paid to the homeowner, or a lump sum settlement. It allows homeowners to enjoy their later years free from the worry of making mortgage payments. The RM Company holds your property – when you create the loan, the RM (FHA backed) decides on how much your house is worth and gives you a percentage of that, its never 100%. If you have ideas of leaving your home to your children, this may not work for you. If you die while you’re living in this home, your heirs have 365 days to repay the loan, if your heirs don’t want to live in the house, the RM will sell it at current market value and give your heirs any left over monies. You as the homeowner, may sell your home anytime you wish, the RM is just considered a loan and new buyers just pay it off when they get a new loan. As long as you live you own the house – you pay the taxes and the homeowners insurance. You must sign a document each year stating that you are occupying the residence at least 6 months a year. (You may own other homes, and you may rent it for only 6 months a year) Each month you receive a statement showing how much the RM company is charging you on your loan. I hope this helps.
dusty_titus | Sep 8, 2010 | Reply