Consumption and Real Estate
what is the pros and cons of “reverse mortgage”?
Question : what is the pros and cons of “reverse mortgage”?
reverse mortgages pros and cons
Best answer:
Answer by jean
pro is you are getting pay each month
con is you are losing your house
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#2 written by bburns31 1 year ago
Warmspirt,
I’m sorry but there are many misconceptions out there about reverse mortgages. Many of them are listed by some of these replies.
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
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#3 written by Funchy 1 year ago
Mostly cons!
The only good thing is you’re getting a small check each money.
The bad news is with every check, you’re losing more and more of your home. If you ever had to sell, move, etc you’d have no equity. Your kids would have no inhertiance. If you were hospitalized and needed cash for an operation your insurance didn’t cover, you’d have no assets.
You also must realise for them to do this, they’re also figuring in a small additional profit to make it worth their while. This means that you’re not just losing the equity, you’re paying a finance company overhead to do so.
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#5 written by shukuken 1 year ago
This is assuming that you get a reverse mortgage from a creditable lending institution.
The pro is that if you’re over 65 you can now enjoy additional income from your reverse mortgage by investing it somewhere with a high yield, not to mention enjoying some big ticket spends.
The con is just adding the consideration of the monthly payment to your budget management and tax preparation. The real con is for the people who expect to inherit the property from you….it cuts down on the value of their inheritance but what do you care. You should enjoy your own money!
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#7 written by peta_wabbit 1 year ago
mostly CONS
check the fineprint – therre is not enough legislation to protect people from reverse mortgages thaat are “shadey”
obviously the money is nice, but if you cannot get refinanced from your bank – then chances are they don’t think you are a good credit risk.. which is exactly the type of client a lot of reverse mortgage companies like.. you default they take your house!
are you willing to risk it all?
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As the above lender stated, there is a lot of mis information about reverse mortgages also known as a HECM or Home Equity Conversion Mortgage. Every other response above pretty much shows you how uninformed the general public is. You can go to the HUD website, AARP’s website, Financial Freedom is the main lender used for reverse motgages. These are safe FHA regulated loans and you do not lose your home. you remain on title. If you would like more info, AARP has a wonderful free book on reverse mortgages.
Here is a page of the top 10 questions copied from HUD’s website:
This page is located on the U.S. Department of Housing and Urban Development’s Homes and Communities Web site at http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm.
Top Ten Things to Know if You’re Interested in a Reverse Mortgage
Reverse Mortgages are becoming popular in America. The U.S. Department of Housing and Urban Development (HUD) created one of the first. HUD’s Reverse Mortgage is a federally-insured private loan, and it’s a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. You can receive free information about reverse mortgages by calling AARP at: 1-800-209-8085, toll-free. Since your home is probably your largest single investment, it’s smart to know more about reverse mortgages, and decide if one is right for you!
1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally-insured as well.
2. Can I qualify for a HUD reverse mortgage?
To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.
3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?
Yes. While your property must meet HUD minimum property standards, it doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
4. What types of homes are eligible?
Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for condominiums to qualify under the Spot Loan program. The home must be in reasonable condition, and must meet HUD minimum property standards. In some cases, home repairs can be made after the closing of a reverse mortgage.
5. What’s the difference between a reverse mortgage and a bank home equity loan?
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, other loan fees, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”
6. Can the lender take my home away if I outlive the loan?
No! Nor is the loan due. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.
7. Will I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.
8. How much money can I get from my home?
The amount you can borrow depends on your age, the current interest rate, other loan fees and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
9. Should I use an estate planning service to find a reverse mortgage?
I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Before you agree to pay a fee for a simple referral, call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.
10. How do I receive my payments?
You have five options:
·Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
·Term – equal monthly payments for a fixed period of months selected.
·Line of Credit – unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
·Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
·Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Return to the HECM homepage
Content updated June 28, 2004
U.S. Department of Housing and Urban Development451 7th Street, S.W., Washington, DC 20410Telephone: (202) 708-1112 Find the address of a HUD office near you