As a follow-up to my blog, AGAIN, before you say no to a reverse mortgage, learn the correct facts! Don't believe the myths!as well as my blog, Are Reverse Mortgages costs so much more than regular mortgages? and also several people commenting about the costs on the blog of Mr Jones, You Should Worry If Dad Says He's Getting a Reverse MortgageI want to expand on a couple of things. First, how costly are they truly? Yes, I pretty much proved my point that the costs not including the mortgage insurance were in line with regular mortgages. With the mortgage insurance, it does add 2%, so it comes pretty close to the 6% mentioned in Mr Jone's blog. Keep in mind, this 6% is spread out among the LO/broker, title company, FHA/HUD, state and county taxes, appraiser, and so forth. Over time, with relatively low interest rates, it is less than most HELOCS, and even some regular mortgages, so that lowers the overall costs.
And we all know, on a purchase/sale, when a Realtor is involved, their costs are usually about 5-6%, sometimes lower, and sometimes higher, but in most cases, that is a pretty good average. Do they get too much? Considering all the work they do with no pay, I do not have any problems with that percentage. Is it high? Maybe, but as I said, I think they do a lot of work with no pay as well, so it evens out, I feel.
Do the closing costs on a reverse mortgage eat up all of a persons equity in their home? No, but yes it does take some. Remember, someone getting a reverse mortgage no longer needs to make payments on their home mortgage, allowing them to focus all their income on paying electric & all utility bills, food, medicines, doctor visits, and also potentially some enjoyable things such as a vacation to relatives, cruise, or whatever makes them happy! How is that for their quality of life! Also, keep in mind as pointed out in several blogs, the interest rate. This is way below almost all HELOCS, and even below many regular mortgages. So that impacts the bottom line of the costs! If they are concerned with leaving the home to a family member, they CAN make payments to keep the loan balance lower, and increase the chance that a family member could get their own financing and keep the house in the family, if they WANT to do this, but again, that is another OPTION.
Do most get the adjustable, yes. And as mentioned in my blog, for twenty years, it stays usually between 5-8%. Lately it has been around the 3-4% mark. In 1991 and in 2000, it went into the 9%. In 2003 & 4, it was around 1.07 & 2.14%. How is that for a great rate?? (These figures are for the monthly adjusting, the yearly one only went to mid-7%'s in 1991 & 2000) With the monthly adjusting Reverse Mortgages, which most get, it gives them the access to the most amount of money. Also, getting back to it eating up 'all their available equity' keep in mind, if they are paying off one or two existing mortgages, THAT is what ate up a lot of their equity - having one or two mortgages. What caused that is what needs to be examined. Was it poor money management, or poor retirement planning? Was it an unexpected medical illness to the person or couple? Were they defrauded out of a lot or all of their money. Did they gamble in general, or in stocks? There are endless possibilities, but the fees to get the reverse mortgage did not CAUSE the person to eat up all their equity. Remember, it is about 6% of the value of their home. That leaves 94% more to be looked at. With the reverse mortgage, they can also only use a certain percentage of the equity as well. Most probably can only use about 50-70% of their equity, the rest cannot be touched, allowing for the value of the home to hopefully repay the loan (of course if it does not, the mortgage insurance will cover the shortage).
What is the cost of a person or couple having their house foreclosed upon? There are many senior homeowners losing their homes these days because of an inability to pay their mortgage, and with depressed home values, now cannot get a reverse mortgage. That is another thing that you cannot easily figure or compute, but it is VERY costly. Imagine being 70, 80 years old and losing your home to foreclosure! WOW! It is a statistical FACT, very, very few with reverse mortgages are foreclosed upon. It is not impossible to happen, but very unlikely, and tremendously less than regular mortgages! That cost is just way to high for me to even think about!
While a reverse mortgage might charge more up front to get the loan, the benefits of a better quality of life, lower interest rates over time, they can suddenly be less expensive that it first appears, and statistically, sometimes a lot less than regular mortgages in just a few short years. And as I said, what is the value of less stress and improved quality of life? Talk to some that have gotten them in the last 5 to 10 years. As I said, many of the reverse mortgages in the 70's and 80's WERE a rip-off, believe me, there WERE problems, but the FHA/HUD backed reverse mortgages today have put a stop to those bad practices, and the ones today, can be an awesome benefit to senior homeowners! Reverse mortgages are NOT for everyone in all circumstances, but before you say no to a reverse mortgage, please learn all the correct facts to make an informed decision!
Title companies & mortgage brokers, help your borrowers- arrange to have their loan signed and notarized in their home, at their convenience by a Certified Notary Signing Agent (CNSA)
Browse The Rain for a qualified and Certified Notary Signing Agent in your area.
Southwest Florida Notaries is open for your mortgage closing 24/7 at your location (Based in Murdock, FL, near Port Charlotte FL, but covering all of Southwest Florida - Manatee, Sarasota, Charlotte, Desoto, Lee and Collier counties)
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