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Martha Said:

pro's and cons of reverse mortgages?

We Answered:

This is a GREAT loan for about 20% of seniors. Its gotten a bum-rap because of a bunch of lenders trying to push everyone into the same program.
For example:

You are 75 years young and have a free and clear house worth $500,000 and very little savings. Trying to live off SSI and a small pension is no way to live - especially you are trying to save money clipping coupons when you have a half a million dollars in equity.

You tell yourself that it makes sense because you can at least leave the house to the kids and they can split it, but theyll probably kill each other trying to get their "fair share" and even if they don't they'll probably just spend the money on themselves and have nothing to show for all your hard work. Besides, they never come to visit anymore anyway.

You get a lump sum today (you choose the amount; from $0 to $100,000) and then you get a monthly check every month based on an actuarial table according to your age and the property's value. The entire loan will never go over 65% of the value of the home and the fees (which are relatively high ompared to other loans) are included. You only pay interest on the money you take - and at the end, your estate still gets the remaining equity.

Not a bad deal for some - but it can create a problem if you outlive the actuarial timeline - so do some research first and plan on living longer than you thnk you will. Remember, this is a TOOL you might be able to use to your benefit. It may not be a perfect fit, but it is one of the options.

Janice Said:

What are the pros and cons on reverse mortgages?

We Answered:

Pros:
Fico scores and income are not taken into consideration.
Age and equity are the determining factors.
Instead of making a payment of a mortgage, the homeowner collects payments according to the terms they agree on which can be lump sum, monthly or annually.
The swing in income is two-fold since the homeowner pockets the money that they would have had to make their mortgage payment with, as well as the payment coming to them from the equity in the home.
Can be used effectively for a foreclosure bailout.
The lender only maintains a lien against the property - they do not take ownership of the property.
Heirs can still maintain their share in the property.
Heirs and children do not have to go out of their ways to help retired parents with mortgage payments.

Cons:
Loan to Value amounts are low, so there must be considerable equity int he home. LTV's average in the 40s.
Maturing events trigger execution of the lien: In this case, if the homeowner dies, or moves out of the home for at least 6 months continuously, then the property must either be refinanced, sold or have the lien placed on it by the lender paid off.

Vickie Said:

Reverse Mortgages?

We Answered:

if the house is paid for, it works like this. The mortgage company will pay them a fixed amount every month (instead of them paying). but when they die, usually the mortgage company gets to keep the house a that point, unless a beneficiary is named.

Calvin Said:

What are the pros and cons of an elderly couple doing a reverse mortgage?

We Answered:

Mid-sixties is a little on the young side. The optimal age for a reverse mortgage is 74-76.

The key is to remain in your home as long as possible to amortize the high upfront costs. If the loan terminates (due to death, moveout, etc) within 5-7 years, you'll have paid a very high price. This is the biggest disadvantage. A recent HUD study shows that most HECM (home equity conversion mortgages) reverse mortgages are terminated within seven years.

The big advantage of reverse mortgages is that in the right circumstances you can access home equity for the rest of your life to help with retirement costs and not have to worry about making monthly loan repayments.

Here's a summary of what several well-known personal finance experts think about reverse mortgages which may be useful to you:

http://www.reverse-mortgage-information.org/what-experts-are-saying-about-reverse-mortgages/

Cheers

Jill Said:

Anypne interested in talking about the pros and cons of a Reverse Mortgage?

We Answered:

The most popular Reverse Mortgage is the Home Equity Conversion Mortgage (HECM) which account for over 90% of Reverse Mortgages done to date. The HECM is Federally regulated and insured (FHA---HUD) They set the rules and regulations. AARP just released a study
(12-12-2007) here's the web address that will link you directly to the report on AARP website...

http://www.aarp.org/research/credit-debt…

You can also go directly to www.HUD.gov to research Reverse Mortgages. Seeing it's their program why not go right to the source. Part of the Reverse Mortgage process is that you have to talk to an independent HUD approved third party counselor to make sure you understand the program and that it was explained to you correctly. (government safeguard). There is no charge for this and you can do this anytime you want. Just another avenue to answer your questions. I hope these resources help in your decision making. If I can be of any other assistance let me know. For disclosure purposes......I have been in the Reverse Mortgage business for over 2 years and I am a Reverse Mortgage Consultant for EverBank Reverse Mortgage, feel free to contact me with any other questions you have.

Regards,

Stephen

Kevin Said:

What are the pros and cons of getting a reverse mortgage?

We Answered:

I knew more about this some years ago when I was a financial advisor. Some generalities I recall:

- Not certain if both spouses need to be 62 but I suspect so. However, similar to social security, the payoff is better the older you start. If you try to get a reverse mortgage too young (say 62), you may be disappointed at the monthly income from it.

Pro's:
- You monetize your house, getting monthly income from it, while still living in it, and get tax-free income.
- These things are so standardized and regulated that I don't think there is much chance of fraud or exploitation.
- The house is yours til the last of you or spouse die (or vacate to live in a nursing home). There is no threat of foreclosure.
- If your house is paid for (or nearly paid for), it is essentially free money.
- Simply taking out a mortgage on the house in order to get a pile of cash to invest, as recommended above, exposes you again to risk of foreclosure -- could be a problem if things turn against you financially. That's not a risk with a reverse mortgage.

Con's:
- You accumulate a loan; it doesn't affect you, but your heirs would have to pay it off upon your death, or else not be able to inherit the house.
- The income ends and you lose the house if you permanently move out of it while still alive. So in other words, if you suddenly decide to move to another state or something, you'd have to resolve that problem one way or another.

All in all I think it's a pretty good deal, unless you are hell-bent on leaving a house free and clear to your kids. I'd probably do it if I were retired and owned a house outright.