Thursday, January 17, 2008
Is a Reverse Mortgage Good for You?
Dear Sue,
I get daily phone calls and mailers up the kazoo bombarding me with offers for a reverse mortgage. I am seventy-six years old and do not even know what this type of loan is.
These sales people make this kind of loan sound so flowery. I don’t want to end up with weeds. Can you explain a reverse mortgage to me, Sue?
Suspicious Sally
Dear Sally,
A reverse mortgage is when the lender pays a sum of money to a borrower based on their home’s equity. The reverse mortgage eliminates any current mortgage payable on the home and instead pays a lump sum or a fixed monthly amount. The loan is repaid when the borrowers move or die. This is accomplished through the sale of the home.
As our population matures, more and more people are able to qualify for the reverse age requirement of 62 or older.
The National Reverse Mortgage Lenders Association estimates that there is $4.3 trillion of equity that Americans in this age group have in their homes. In fact, over the past five years, more than 300,000 reverse mortgages have been originated in the United States. This number represents less than one percent of the reverse mortgage market potential.
No wonder you have been bombarded with offers for a reverse mortgage!
Research shows that a reverse mortgage can be great for some and not so great for others. It depends on several factors especially one’s needs. Seniors with a fixed income hammered by inflation and not wanting to leave their home are perfect candidates. A possible downside of a reverse mortgage is the inability to pass the now encumbered home onto one’s heirs.
Good credit is not a consideration when applying for a reverse mortgage. Along with the age requirement of 62 or older, one must occupy the home as a primary residence.
The home also needs to pass an inspection. If repairs are required, they are usually paid for from the proceeds of the loan.
Ninety percent of reverse mortgage loans are federally insured and generally less expensive than those that are provided by banks and other private lenders.
Borrowers applying for an insured or HUD backed loan are required to go through a counseling program administered by a certified reverse mortgage counselor to ensure that they understand the terms of the loan.
There are a few websites where you can learn more about reverse mortgages:
www.arp.org/moneey/revmort
www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm
www.reversemprtgage.org
www.bestreversemortgage.com
I always recommend that one consult with a trusted financial advisor before entering into any type of financial agreements including loans. Once you have all the facts to make an informed decision, a reverse mortgage could be a matter of Good Home $$s and Sense.
Dear Sue,
I get daily phone calls and mailers up the kazoo bombarding me with offers for a reverse mortgage. I am seventy-six years old and do not even know what this type of loan is.
These sales people make this kind of loan sound so flowery. I don’t want to end up with weeds. Can you explain a reverse mortgage to me, Sue?
Suspicious Sally
Dear Sally,
A reverse mortgage is when the lender pays a sum of money to a borrower based on their home’s equity. The reverse mortgage eliminates any current mortgage payable on the home and instead pays a lump sum or a fixed monthly amount. The loan is repaid when the borrowers move or die. This is accomplished through the sale of the home.
As our population matures, more and more people are able to qualify for the reverse age requirement of 62 or older.
The National Reverse Mortgage Lenders Association estimates that there is $4.3 trillion of equity that Americans in this age group have in their homes. In fact, over the past five years, more than 300,000 reverse mortgages have been originated in the United States. This number represents less than one percent of the reverse mortgage market potential.
No wonder you have been bombarded with offers for a reverse mortgage!
Research shows that a reverse mortgage can be great for some and not so great for others. It depends on several factors especially one’s needs. Seniors with a fixed income hammered by inflation and not wanting to leave their home are perfect candidates. A possible downside of a reverse mortgage is the inability to pass the now encumbered home onto one’s heirs.
Good credit is not a consideration when applying for a reverse mortgage. Along with the age requirement of 62 or older, one must occupy the home as a primary residence.
The home also needs to pass an inspection. If repairs are required, they are usually paid for from the proceeds of the loan.
Ninety percent of reverse mortgage loans are federally insured and generally less expensive than those that are provided by banks and other private lenders.
Borrowers applying for an insured or HUD backed loan are required to go through a counseling program administered by a certified reverse mortgage counselor to ensure that they understand the terms of the loan.
There are a few websites where you can learn more about reverse mortgages:
www.arp.org/moneey/revmort
www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm
www.reversemprtgage.org
www.bestreversemortgage.com
I always recommend that one consult with a trusted financial advisor before entering into any type of financial agreements including loans. Once you have all the facts to make an informed decision, a reverse mortgage could be a matter of Good Home $$s and Sense.
Labels: reverse mortgage
# posted by Sue Thompson @ 3:01 PM 
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