I had a Realtor tell me that she got a reverse mortgage last year.  She is in her early 30's so I knew something was fishy.  Upon further explantion, I figured out she was talking about an option ARM with negative amortization.  NOT the same thing and easily confused by people not in the mortgage business.  Just my 2 cents worth.....

I have seen reverse mortgages work very well in the right scenarios. I once had one of my clients take one out after her husband died to help pay her bills and stay afloat. She was able to live the rest of her natural life in comfort and without financial worry. I am sure if I could ask her today she would tell me it was all worth it for her.

Tony - I got a chuckle out of that one, thanks!  Yes, a Reverse Mortgage is NOT the Pay Option Arm.  However, they are both a negative amortization that utilizes your equity.  I love the POA for someone who is an Investor with multiple properties.  It helps balance the risk.  Good to know the Realtor has the concept down that she might suggest a client look into these programs at some point.

Jacob - that is a wonderful happy ending.  I'd be curious if you checked in with her what she might say and if you would share her Testimonial?  You never know, it could bring you a referral by reminding her you're out there!

Reverse Mortgages can be great for seniors. My mother-in-law, who was about 85 at the time, refinanced with a reverse mortgage. After refinancing she had additional monthly income from the mortgage payout. She passed about a year later and the house sold with a profit even after the mortgage was paid off. It worked out well for her, God bless her soul.

Derrick - that sounds like the perfect scenario.  Thanks for sharing.

Melissa that was a very nice overview of the reverse mortgage options and how they can be used.  I just recently helped an elderly uncle put one together.  Very nice post.

Thank you Gary.  I hope your uncle is happy with the experience.

Ever since I helped a seller get out of a home with a reverse mortgage, this has scared me.  She had barely enough equity left to cover her selling costs.  I think it is VERY important to help our loved ones choose a reputable lender for any reverse mortgage and to make sure they understand all the disclosures.

Good info Mmelissa.

I was wondering if a 62 yo with a debt free home valued at $400k took out a lump sum $100k reverse mort at todays terms and lived till age 75, what would be the balance owed?

Thanks for your help!

Margaret - Yes, it must be more than a disclosure.  I keep a record of programs I've put borrowers on.  In this circumstance I would have contacted her with enough time before she's in a stressful situation.  This is an excellent way to take care of people, earn trust, and perhaps offer a referral.

Armando - Here's a famous answer.  "It depends".  A member of Fannie Mae comes out to interview the borrower to help determine what program has the correct fit.  I have no control over what rate, fee, or program is determined.  I do agree it to be valuable for the borrower to have this independent expert make the determination.

The rate is variable, not fixed.  I did try to get a rate quote on your specific scenario, but can't because the lender doesn't know until the interview is complete and the recommendation received.

CAN ANYONE ELSE READING SHARE THEIR EXPERIENCE ON RATE AND FEES THAT THEY'VE SEEN?

Hello Melissa.....

If anyone is thinking about using or recommending a Reverse Mortgage, I would suggest checking out the fees that are involved.

You will be told that they can be deducted at the closing, but besides the normal closing fees, you will be paying from 2%-3% in points.

I considered going to a Reverse Mortgage, but the high fees dissuaded me from doing so.

RJ Curtis

www.rjsellspalmbeach.com

Ronald - I indeed tried asking this question yesterday.  The wholesale lender told me they are determined by the person from Fannie Mae interviewing the borrower based upon the program they decided is right for them.  The information I read says they can only charge a max of $2,000 or 2 points, which ever is greater.  Then they pay me .5 commission.  I'll be curious to see if anyone ever goes through with this in my neighborhood.  Thanks for sharing your experience.

High Costs have been an issue on reverse mortgages since their inception.  Not only do you have the cost of getting the loan, including points, but you have mortgage insurance on the FHA HECM, as well.  The mortgage insurance is different here, though.  It is insurance that the borrower will get their money, not the lender!

But, like all investment and purchase decisions, the question shouldn't only be "what does it cost", the question should be "what does it cost and what do I get for it"?  If the benefits are worth it for the borrower in their particular circumstances, they should go for it.  I'm trying to put my mother in one right now!  To me, when you are in your "golden years", you should have a good time and spend some money.  But worries about finances precludes that for most people. 

Reverse mortgages lack payments, give access to either a line of credit or an income that could be great for so many people.  Home repairs, once in a lifetime triips, helping with a grandchilds education, a new start in a new career, a vacation home that you've always wanted, life is short.  I want mom to spend my inheritance on herself.

Margarett - besides the benefits mentioned by Melissa, your seller would have had to NEVER sell her home on modern reverse mortgages.  Owe more than it's worth?  That's the lenders problem, not the borrowers.

Brett - Thank you for sharing your personal situation.  Have you finalized the process and decided to go through with it then?  Yes, the costs seem minimal in this situation compared to the benefit.