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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Pros - no payments so seniors can live with a much larger cash flow than a traditional mortgage can offer.  Qualifying isn't as tough as a traditional mortgage.  Gives cash strapped seniors an option when SSI or other income sources aren't cutting it realistically or allowing them to live comfortably.  Allows seniors to remain in their home rather than being forced to sell due to finances.

 

Cons - negative amortization is a major issue if the borrower wishes to leave a property or property proceeds to heirs, OR has a change in financial circumstances where a reverse wouldn't be necessary any longer.  Costs for a reverse are higher than a standard loan.  Taxes & insurance still need to be paid regularly on a property.  Many lenders jack up rates/fees to cash in on this product, which until recently, was not tightly regulated.

Feb 16, 2016 02:08 PM
Rainmaker
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Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Margaret. We do them, but only when it is the right solution for the clients. It is not for everyone, but when it's the right property and there are not enough dollars available to make the transaction work, it could be the right solution.

Feb 16, 2016 04:24 PM
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Liz and Bill Spear
RE/MAX Elite 513.520.5305 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Hello Margaret, thanks for finding my post on the topic!  I definitely see pros and cons.  For the right person they might be a perfect fit, but I suspect for most clients they'll steer clear.  http://activerain.com/blogsview/4818648/using-a-reverse-mortgage-to-purchase-your-cincinnati-patio-home#19861627

Feb 16, 2016 10:04 PM
Rainmaker
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Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

I'm glad to see mortgage experts John Meussner and Joe Petrowsky add their knowledge and expertise.  That's one of the many great things about ActiveRain.   

Feb 16, 2016 09:45 PM
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Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I'm anti reverse mortgage.  I see lots of foreclosures from them and have seen people who lived in the home, but were not on the mortgage left homeless.  I see zero pros

Feb 16, 2016 01:38 PM
Rainmaker
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Jill Murty, Realtor - Orange County, CA
PREA Realty - Laguna Niguel, CA

The borrower must take a class or meet with a counselor to make sure they understand purchasing using a reverse mortgage.  

Reverse mortgage is an FHA product, so if the buyer is planning to buy in a condo community, the community must be FHA approved.

The borrower does not receive payments, but they do not make payments either  though they are responsible to pay taxes, insurance and HOA fees, if any.

There's a negative amortization component and some people worry there won't be anything left for their grown children.  The grown children should assure their parent(s) that they do not want or expect any money from their parents.  It's kind of selfish to expect an inheritance.  

Feb 16, 2016 01:24 PM
Rainmaker
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Jeffrey Jones
AZ Home Seekers - San Tan Valley, AZ
AZ Home Seekers, azhomeseekers.com

since its FHA its costly with upfront PMI

Feb 16, 2016 09:41 PM
Rainmaker
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Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

I have only had 1 purchase where they used a reverse mortgage to purchase it. Most are owners who own outright, want to stay in their home but need money to live 

Feb 16, 2016 09:11 PM
Rainmaker
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William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I have not done one but I don't see where there should be much of an issue.  There is a payoff just like any mort.

Feb 16, 2016 12:24 PM
Rainer
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DEANNA EARLY - - ( NMLS # 268590 )
American National Bank & Trust - Smith Mountain Lake, VA
Highest Ranked Mortgage Loan Originator Virginia

I have done Reverse Mortgages Margaret Rome, Baltimore Maryland for a number of clients for purchases and in refinance situations where it was a better option.   John Meussner gave you an excellent overview but clients are unique and so is this product.   There are other pros and cons not mentioned here so you should be sure your clients have a COMPLETE understanding for their unique financial situation from a professional lender before going forward.

Feb 19, 2016 08:07 AM
Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

John Meussner provides a great explanation of the general pros and cons of Reverse Mortgages below, Margaret Rome, Baltimore Maryland ... For some, Reverse Mortgages are a godsend.  They can be crippling financially for others.  It's why it's so important that the specific pros/cons of entering into this type of financing are found through intensive consultation(s) with an experienced Reverse Mortgage Originator and Lender.  That importance can't be overstated ...

Gene 

Feb 17, 2016 02:32 AM
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Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

good questions and I loved reading the answers....thanks, Margaret....

Feb 16, 2016 10:37 PM
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Margaret Rome, Baltimore Maryland
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

 

Thanks to Liz and Bill..please read about reverse mortgages used for a purchase.

http://activerain.com/blogsview/4818648/using-a-reverse-mortgage-to-purchase-your-cincinnati-patio-home#19861627

Feb 16, 2016 10:20 PM
Rainmaker
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Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Never had to deal with type of financing.

Feb 16, 2016 09:18 PM
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Mary Yonkers
Alan Kells School of Real Estate/Howard Hanna Real Estate - Erie, PA
Erie/PA Real Estate Instructor

Good morning Margaret Rome, Baltimore Maryland Good advice from Joe Petrowsky and John Meussner 

Feb 16, 2016 08:08 PM
Rainmaker
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Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

So many little issues with doing one of these, I've stopped figuring it out and just send any interested client to a great rm lender and then take it from there.

Feb 16, 2016 08:06 PM
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TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029

 Good morning Margaret Rome, Baltimore Maryland . Good question! I enjoyed reading the answers.

Feb 16, 2016 05:12 PM
Rainmaker
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FN LN
Toronto, ON

This is a complicated subject that cannot be addressed in a few sentences.  A pro or con in one situation may be the opposite in another situation.

Feb 16, 2016 04:28 PM
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Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

I am not an expert but it removes equity. This may be good for someone who has no one who is going to inherit their property?

Feb 16, 2016 12:36 PM
Rainmaker
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Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

I am not a lender, but see there are some that have answered.  Had one family do a reverse mortgage after they had gone through a short sale.   They got approved and wasn't even a full year.

Feb 19, 2016 04:28 AM
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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Margaret, the major con I've encountered is difficulty getting good information on how these loans work.  They sound like an interesting option for people who want to stay in homes that are not paid off, but that have a lot of equity.

Feb 17, 2016 11:45 AM
Rainmaker
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Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

I love John Meussner comment..great explanation!! Short version!

Feb 17, 2016 11:06 AM
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

I have only seen one, and it did not work out well for this older couple.

Feb 17, 2016 10:34 AM
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Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

Personally, I only know of one person who has done this and it is my Sister and she regrets it already.  She didn't say why.

Feb 17, 2016 09:24 AM
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Kathleen Luiten
Resort and Second-Home Specialist - Princeville, HI
Kauai Luxury Ocean Home Sales

John Meussner gave you a great summary, Margaret. Buyer be (a)ware when it comes to reverse mortgages!

Feb 17, 2016 05:49 AM
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Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

The fees are huge on these.

Feb 17, 2016 04:52 AM
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Paul S. Henderson, REALTOR®, CRS
RE/MAX Northwest. - Tacoma, WA
Tacoma Washington Agent/Broker & Market Authority!

The challenges seem to take place at the end or to the estate afterwords

Feb 17, 2016 03:00 AM
Rainmaker
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Roy Kelley
Realty Group Referrals - Gaithersburg, MD

You must carefully consider the needs and resources of the prospective borrowers. No mortgage payments for life and a better quality of life are the benefits when the product meets the needs.

Feb 17, 2016 01:26 AM
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Tony and Suzanne Marriott, Associate Brokers
BVO Luxury Group @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

parked and reading

Feb 16, 2016 10:48 PM
Rainmaker
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Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Fairway Mortgage keeps running seminars on this . My current understanding is it's a good way to purchase a condo in FL  !(to be a snowbird).

Feb 16, 2016 08:48 PM