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Arlene Said:

what is the pros and cons of "reverse mortgage"?

We Answered:

Warmspirt,

I'm sorry but there are many misconceptions out there about reverse mortgages. Many of them are listed by some of these replies.

There really is only one downside to taking out a reverse mortgage. The children are not left with 100% of the value of the home for an inheritance. From my experience and my own personal view, most children would want their parents to live their life to the fullest and don't care if part of their inheritance is reduced. It is YOUR home and you worked hard to pay for it. You should enjoy the benefits of it.

The house is still in your name it just shows that there is a mortgage on the home like any other conventional mortgage. You can take the full amount in a lump sum, split it up in monthly payments or leave it in a line of credit which right now has a growth rate of about 7%. With the line of credit you are only charged interest on what you pull out of the line of credit and that interest rate right now is right around 6.5%. The rest of the money sits there untouched until you need it. These loans are set up so that there should always be equity in the home to pass along to your heirs. Also, you can repay the loan at anytime with no prepayment penalty.

All of this money is tax free and there are no monthly payments to make. You CAN make a payment if you want and are concerned about keeping the balance down. You even get a tax break if you pay back the interest you are being charged.

This is a much better option than a home equity loan which you have to make high monthly payments and if something happens and they get behind could lose their home. With an FHA reverse mortgage there is NO way to ever lose your home or be foreclosed on.

So really the only downside to reverse mortgages is that the heirs wouldn't get 100% of the home value for your inheritance.

I'd be happy to send you some more information if you would like. This is what I specialize in and our company can do reverses almost anywhere in the country. If you would like some more information please email me at bburns@griffinloans.com

Jessie Said:

PROs and CONs of a REVERSE MORTGAGE for my elderly parents?

We Answered:

According to financial expert Dave Ramsey. Beware!

http://www.daveramsey.com/etc/realestate…

Nina Said:

Can someone explain to me the Pros's and Con's of a "Reverse Mortgage? I am 74 years old and considering i?

We Answered:

I'm a Reverse Mortgage Specialist!

A reverse mortgage is a home equity loan for people aged 62 and over. (I don't like being called a Senior Citizen or even worse, a "Senior", so I never use it.) We're able to lend you a percentage of the value of your home. Out of that amount, we need to pay off your mortgages, lines of credit, home equity loans, tax liens...anything creating a lien on the property. There are substantial closing costs on a reverse mortgage because there's an origination fee and mortgage insurance (which actually benefits the borrower, unlike regular mtg ins).

You wouldn't have to make a payment to the lender as long as you live in the house. You would pay your real property taxes, if you have any, and your home owners insurance, but you wouldn't be required to make a mtg payment. You can make a payment if you want, no prepayment penalty, so if you want to make any amount of payment at any time, you can. You are still the owner of the home, and you can sell it anytime you want. You also decide who will inherit your home. Your heirs have the same options they do when inheriting a home with any kind of mortgage: they can pay it off with whatever money they have; they can sell the house and pay from proceeds, any additional proceeds are theirs; or if someone wants they house they may be able to refinance into their own names, but their income and credit and assets and debt ratios will be considered.

On the reverse mortgage, those factors will not affect your eligibility. We do have to pull credit reports to comply with the Patriot Act, but we consider 3 other things to get started on this.

1. All owners must be at least 62 years old and the house must be their primary residence. You "can" remove a younger owner's name, but we strongly advise you to consider what will happen if the mortgagor dies...the loan will be due, and the other person is now an heir, not an owner. Be sure you plan for that contingency, or your younger spouse could end up looking for a place to live.

2. The type of structure must fit the guidelines: 1 to 4 family homes, most condos, and manufactured homes that meet the rigid FHA guidelines. We specifically can do some coops in the NYC area with our proprietary product, but the percentage you get is miniscule.

3. The amount available to you must be enough to cover your mortgages and closing costs. You can pay the difference if it's not, but you have to decide if it's worth it.

This is a wonderful loan for people who need it. If it comes to getting a reverse mortgage or losing your house, no doubt this is the better option. If your children are worried about not getting any inheritance, forget about them. They should worried about how you're enjoying your retired years.

The AARP has a list of lenders. I'd tell you to call me, and I'd send you an information package, but this forum is NOT a place to solicit business, although you see it all the time. I thought I had a phone number for AARP on my desk, but I can't find it, and it's almost time to go home.

Veronica Said:

Same Question - different category: PROs and CONs of a REVERSE MORTGAGE for my elderly parents?

We Answered:

A reverse mortgage can be wonderful if done right. I usually suggest that people take the funds as a line of credit. They request a sum for a particular thing and then spend it during the month that the check arrived. This way it wont affect any benefits that depend on your assets or income.
You will never outlive a reverse mortgage because they wont give you more than about 80% of the home value. What you get will be determined by age and value of the home. Sounds like your parents may have a problem getting a reverse mortgage if the home is in too bad repair.
All the charges are due when the mortgage comes due and you are charged a monthly fee (added in to what is paid at the end). The fees can be a bit hefty. The loan would only come due if a person dies, sells the house or is not living there for 12 consecutive months.
Whatever is left that was not used in the line of credit minus the fees would go to the persons estate if they pass away.
Be wary of companies that havent done reverse mortgages often or for a long time. Two of the best in the business are Financial Freedom and Wells Fargo. Make sure you are getting a mortgage backed by the Feds and that your parents go through the required independent counseling so that they are aware of what they are signing.
You might tell your siblings that if Mom or Dad has to go into a nursing home and is getting Medicaid, that the state will put a lein against the house anyway to get reimbursed for what they spent on Medicaid.
I think the wise choice is to talk to a reputable reverse mortgage specialist to see what they could get to make the home more adaptable. They can also use the funds to pay for in home care if needed.

Kent Said:

Regarding Reverse Mortgage, what is the pros and cons of HECM lenders vs. non-HECM lenders?

We Answered:

Money Magazine had a report on reverse mortgages.
They considered them one of the worst financial mistakes a person can make in a lifetime.

They suggested to sell your home.
Take the cash equity and buy a much smaller home or rent.

Are you sure you really want a reverse mortgage.
They are big money makers for the brokers - they can be very pushy
Keep your head on straight with them.

At age 80 - are you really going to want to be taking care of a home?
Cutting the grass, making repairs, fixing faucets.
Get a condo - and let someone else do all the work.
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