The question of whether a reverse mortgage will work for you or not, is an oxymoron. If you are 62 years of age and older, live in your primary residence, have enough equity in your home and are looking for a financially secure investment, there is nothing about a reverse mortgage that won't work for you.
Most importantly, a reverse mortgage is a Federal Housing Administration insured, non-recourse loan, meaning you, as the homeowner, never owe more than the value of your home. If the loan amount were to rise above the present value of the house, the difference is covered by FHA's Mortgage Insurance Premium.
The benefits of a MIP, in general, are immense. For example, if the value of the loan rises above that of your home value, you are financially responsible for the full amount, therefore, lenders might take a more cautious approach and set the principal limit available to the borrower much lower than in a reverse mortgage. In addition, non-FHA insured loans also carry higher fees and pricing programs in order to protect potential lenders from risk. The presence of a MIP, however, ensures the borrower has more access to equity than they normally would at lower costs.
For this insurance premium provided by the FHA, the borrower must pay both a 2% maximum claim as well as an annual premium, which is charge monthly at the annual rate of 1.25% of the outstanding loan balance. These are different from the MIP for regular FHA purchases. The charges for the FHA insurance premium are calculated at closing, charged to the borrower throughout the life of the loan and are non-refundable.
On the other hand, the benefits of a FHA insured loan outweigh the costs. Read about my own grandparents' reverse mortgage and how their decision benefits, not only them, but also their heirs. If you think a reverse mortgage is right for you, or are still on the fence, give PS Financial Services a call at (888) 845-6630 or email us at info@PSReverseMortgage.com. We do not pressure those who inquire, we are just here to help.