October 10, 2008 - I have found there is a TON of misunderstanding around reverse mortgages.
1. What do you think a reverse mortgage is?
2. How do you think it works?
3. Why do you think it is good/bad?
You must answer all three to be considered for best answer.
Responses:
Instead of paying the mortgage holder a payment each month and resulting in a lower balance owed to the mortgage holder, a reverse mortgage goes the other way. The balance owed increases each month and the mortgage holder issues a payment monthly to the property owner.
The property owner usually has a fairly large equity in his home and he converts this into income over time and increases his balance owed. As with conventional mortgages, there are limits as to how much he can take out as income based upon equity, property value, and other factors taken into account common to any mortgage.
It can be helpful to the elderly who need income and who have a high equity in their property and who have little to no other income sources. It does increase their amount owed so at some point the balance must be paid. Many elderly see this as a way to live for now and pass on less inheritance value to their heirs. The down side is that they can lose their home if they run out of equity and have no other income sources. Interest rates may be substantial with these. Some providers are not all that clear to the property owners about the home loss risk and the elderly may not understand all of what they are doing either (no matter how carefully someone explains it to them).
1. Its when your house start to pay you, and when you die it becomes the property of the bank. There are different types though so this varies.
2. you apply for one of three types of reverse mortagage.
If you want to make a home repair or improvement or need help paying your property taxes, you may want to find out if you qualify for any low-cost single-purpose loans that may be available in your area. Area Agencies on Aging (AAAs) generally know about these programs. To find the nearest agency, visit www.eldercare.gov or call toll-free, 1-800-677-1116. Ask the AAA for information about available “loan programs for home repairs or improvements,” or “property tax deferral” or “property tax postponement” programs.
If you are interested in a federally-insured HECM, know that all HECM lenders must follow HUD rules, and that many of the loan costs including the interest rate will be the same no matter which lender you select. Still, some costs including the origination fee, other closing costs, and servicing fees may vary among lenders.
If you live in a higher-valued home, you may be able to borrow more from a proprietary reverse mortgage. But it generally will cost more. The best way to see key differences between a HECM and a proprietary loan is with a detailed side-by-side comparison of future costs and benefits. Many HECM counselors and lenders can provide you with this important information.
No matter which type of reverse mortgage you are considering, be certain you understand all the conditions that could make the loan due and payable. Ask a counselor or lender to explain the Total Annual Loan Cost (TALC) rates, which show the projected annual average cost of a reverse mortgage, including all itemized costs.
3.Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
As you consider a reverse mortgage, be aware that:
Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
The amount you owe on a reverse mortgage generally grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases over time as loan funds are advanced to you and interest accrues on the loan.
Reverse mortgages may have fixed or variable rates. Most have variable rates that are tied to a financial index and will likely change according to market conditions.
Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause, found in most reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid.
Because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So, for example, if you don’t pay property taxes or maintain homeowner’s insurance, you risk the loan becoming due and payable.
Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.
A reverse mortgage is where you are effectively getting money on the equity of your home from a lender. You have to pay it back when you die, or the home becomes property of the lender.
Yeah, it works.
Its good if you need money and you don't want anyone to have your property when you die. Its good if you make a GOOD deal with the lender.
The bad thing is, lenders don't make good deals. They are in it to make money, and when you die, they expect to get the money asap or the house and make a profit from it.
1. a reverse mortage is where the bank pays you each month instead of you paying them
2. it works for people with lots of equity, say you owe $100,000 on your original loan, but since real estate has gone up, your house is worth $300,000, a reverse mortage pays you a bit of this equity each month. Your balance owed goes up with each payment, and interest acrews on the balance owed.
3. it is only good for older people with lots of equity and no money, you can get a monthly check for living expenses but you are pissing away the money "Saved" in the equity in the house, when you die, there will be less equity that your children or other descendents can cash out. If you live long enough to work your balance up to the value of the house, you may be really screwed because the bank will stop giving you reverse mortgage payments and demand you start Making normal mortage payments.
A reverse mortgage is a loan against the equity in your home. You can only get loaned about 50% of the amount of equity you have, depending on your age. The older, the more you can get. btw...must be 62 to get a reverse mortgage.
No payments are due while you live in the home. Interest is accrued against you, and is deducted from the equity you have in your home. The loan (it is very much a loan) comes due when you die or otherwise permanently move out of your home.
It is good and it is terrible. It is great...when it fits your situation. To learn more about that, visit below.
(Good question)
Reverse mortgage is a funding option that gives senior citizens a payout now without a mortgage payment
Reverse cashes out home value now; leaves repayment to estate, or by sale of home after death of lender
Good; instant cash with no repayment worry
Bad; estate loses house as an asset or has to repay mortgage.
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Reverse mortgage?
October 10, 2008 - Category: Mortgage
i have found there is a ton of misunderstanding around reverse mortgages. 1. what do you think a reverse mortgage is? 2. how do you think it works? 3. why do you think it is good / bad? you must answer all three to be considered for best answer. reverse
Reverse mortgage »
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Is there a reverse mortgage available for people less than 62 years old?
what is a reverse mortgage and how do people benefit from them?
