I am seeing more and more ads for these reverse mortgages.  When I saw the first one on TV a couple of years ago, I thought there must be a catch somewhere in all of this.  Then we had an informational meeting about it at the office and of course I had to miss that meeting. I was told that FHA has adopted it as a program, but that there were quite a few questions that the financiers at the meeting could not answer.

What is the general feeling out there in regard to the reverse mortgage?  Am I the only one that doesn't trust it ?  Maybe I just need to be educated on it.  Understanding often brings acceptance. The way it is presented in the TV ads, makes it seem too simple.  What about estate taxes?  What about the heirs responsibility?  What if the individuals live to be very old?  Help!?   

 

5 Comments on Reverse Mortgages?

NOV
13
2008

You are right with an education is needed for anyone interested in a Reverse Mortgage.  It takes a differnet type of thinking process.  Actually they are fairly simple and very little qualification on the home owner is required. 

Look into them with a reputable lender from your area.  They are not for everyone but more and more home owners are finding them to be what they need. 

If you need any help finding someone in your area to speak with please let me know.
2:26pm • #1
NOV
14
2008

The best way to describe this mortgage program is a refinance to allow seniors 62+ to access the equity they have built in their homes over years and get cash out (usually up to 50%-75% of equity) while still living and owning the home and making NO monthly payments. It is a lein placed against the home that does not have to be repayed as long as one of the borrowers lives there. Like a forward mortgage, there are interest rate charges, but unlike the forward they are not paid by the borrower in monthly payments. Instead they are added into the balance of the loan. One advantage of the program is the rates for the reverse are lower than a forward.

How is it paid back? The option is available for homeowners to pay back the loan if they would like, either partially or in whole. It is NOT required. There is no pay back required as long as they live in the home. The loan becomes due in one of three cases:

1. The borrower(s) pass away. Unfortunately we all have to. Heir options described later.

2. The borrower(s) move out of the home. If they move to another home or to a assisted living situation, the loan would need repayed.

3. The home is not kept in good working order. Home insurance and taxes must be kept current as well as upkeep.

By using the term borrower(s), I mean to say if there are two owners that take part in the program, it is not due as long as one remains living in the home. Only if both pass away or move out is the loan due.

When the home is left to the children or others, they have a couple options to pay the loan back. The first would be to sell the home and repay the lein out of the proceeds. The remainder is passed on to the estate. Customarily there is a one year grace period to sell. The second is to refinance under a traditional forward mortgage and retain the home as their own. Under the sell option, the heirs are only responsible for the loan amount up to the value of the home when it's sold. That is to say, they can never owe more than the home is worth. Again that is only under the sell option. If they retain the home, the loan balance is required paid in full.

There are a variety of payment options to the seniors they can choose. Lump sum payments, a line of credit to use as needed, and monthly payments either for a set time (10 years, etc) or term payments for as long as they live there. Or combinations of the above. Each has different value to each senior.

Also a heads up, as of January 1, 2009, seniors may be able to use the reverse for home purchase as well.

Hope this helps answer your questions. If you have any other questions, please let me know.

Kyle Wilson
10:22am • #2
NOV
15
2008

A Reverse Mortgage is a great product for the right situations.  There is alot of confusion and mis-information in the general community.  It is most important that the borrowers work with a lender that is knowledgeable about the program and is also willing to commit to extra personal service to assist the borrowers through the process.  Many times the lender may be dealing with the borrowers' other family members, attorneys, financial planners, and advisors.   If you would like specific information let me know. 

Wendy Olson  
1:06pm • #3
MAR
17
2009
430,645 Points 1 Featured Post

I have done one reversed mortgage and it worked just fine.

ginger of southport
1:22pm • #4
MAY
19
2010

Susan, in the earlier years of the reverse mortgage, there were ligitimate concerns because banks held title, could force borrower to move if equity was stripped and home went backwards.  However, in the 80's, National Council of Aging and AARP lobbied Congress to change the reverse guidelines.  Congress solicited FHA to back and insure the loan.  FHA did and revised guidelines.  President Reagan signed off on the new improved loan and called it the "Home Equity Conversion Mortgage".  Now the borrower retains title, can never be forced to move even if the house goes backwards in value.  The loan is treated similar to a traditional loan in regards to the heirs:  If the borrower dies, the heirs can sell the home and pay off the loan and interest and then divide up the equity or pay off loan and interest and keep the home. 

 

Susan, I wrote about 7 articles on ActiveRain that explain how the refinance and the purchase works.  Hope this helps.  Mary Andes.
9:24pm • #5


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Susan Brinker - Wright Realty

Conway, NH

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Coldwell Banker Wright Realty

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