Any thoughts on Reverse Mortgages? What is the upside? And the down side?
.We are looking to retire. I’ve read a little about them but they are confusing. Each plan we have read says something different. And the cost?
Tags: Cost, Mortgages, retire, reverse mortgage, reverse mortgages
what happens when the reverse mortgage is done? where will you live then? and if one of you needs a nursing home while you still own your home the nursing home could take it from you and the bank.
Reverse mortgages are almost always a bad idea. Really bad idea, unless you are the one who is loaning the money. hahaha
If you have a lot of equity in a home there are a lot of better ways to get money than to get a reverse mortgage. I feel that people who get people reverse mortgages are like loan sharks taking advantage of the old and weak.
Upside is that u get cash which u can spend directly rather than tit being locked up in your house.
Downside is that ur house is no longer ur’s and becomes the property of the bank once u and ur partner die.
Personally, it really depends on u. Do u have kids to who u would like to leave an inheritence? If yes – then don’t go for the reverse mortgage.
Best situation is to probably sell your house and buy a smaller/cheaper unit. That way u release the extra cash. Another option is to rent a small unit rather than buying. Depending on where u live, this could be a better option!
Reverse mortgages is all that I specialize in. I have seen it change many people’s lives. As of yet I don’t know of one unhappy customer. I would be glad to put you in contact with some of them who have volunteered as references. If you have not yet gone through the reverse mortgage counseling I highly recommend it as a uninterested second opinion who you can ask as many questions as you need to. It is the first step in getting a reverse mortgage and is free of charge. It also does not obligate you to do a reverse mortgage. If you do not know of any I would be glad to refer you to a few.
As your question is directed towards people who have already taken out a reverse mortgage I can only supply you with the facts but ultimately the decision is yours and you should only make it if you are %100 sure you want to.
Just to clear up one response, the bank does not own your home at any time. You always remain on title as owner. They simply have a mortgage against it just like any other mortgage. If you pass away or sell the home, it still goes to your heirs. There is a big misconception that you only get paid monthly. That is ONE option but you can also get the money in a lump sum, a line of credit or a combination of all three. If you are concerned about using up equity the line of credit may be a good option. With the line of credit you are only charged interest on what you withdraw. You can pay it back at any time and even get a tax break on the interest you are charged. The line of credit also grows currently aroundd 7% a year which means down the road you will have more money available to you.
The fees are standard fees set by FHA and can not be manipulated by mortgage companies. Basically there is:
2% of the home value or lending limit origination fee. This is how the mortgage company makes their money. Typically mortgage companies get aroun 3% and some even get up to 5% on conventional mortgages. Many times this is paid to the loan officer on the back end of the deal that the borrower never sees. So, 2% was mandated by FHA. Now if you are in a high home value it may not be a full 2% but I can get more in to that later.
2% FHA Mortgage insurance. This is what FHA charges to insure the loan. This protects you so that if the lender goes bankrupt FHA places your loan with another lender under the exact same terms. It also protects you so the if for some reason you home depreciates in value greatly and you end up owing more on the loan than your home is worth you or your heirs will not be held responsible for the difference.
Third, are the typical closing costs for doing a loan. These include appraisals, title work etc. I’m sure you’ve heard of no closing costs loans but those items still have to be paid for. The way lenders do that is by giving you a higher interest rate. In order for you to get the absolute lowest interest rate FHA makes lender charge these costs upfront.
All FHA reverse mortgages are standard and you should be quoted just about the same figures everywhere you go.
If you would like any more information, references or counselors please feel free to contact me.
Thanks,
Brandon
bburns@griffinloans.com