From a legal, financial and security perspective, I think reverse mortgages are financial traps and to be avoided at all costs. Have you ever read all the terms, as well as send the amortization schedules? There's a lot of hype with stars pitching these dangerous financial products, but they're like financial quicksand in my opinion.
The only reason monthly payments aren't required is because then they're compounded. Instead of paying down a mortgage, the mortgage balance increases, phenomenally. The amount increases every month. Then it would be very difficult for someone to pay it back.
You wrote that one could be used to pay a current mortgage. From my understanding a reverse mortgagee will pay off existing mortgages so that it holds a first place (priority) position as first mortgagee. There would be no other mortgages to pay off, nor would any legitimate mortgagee lend on a second and subordinate position because it would never be paid off.
Based on what I saw when reviewing one for a friend, they're reversely amortized. The interest is added onto the amount advanced, and compounded. Once you get a reverse mortgage, it would be literally impossible unless you hit a financial windfall.
As Flyer states, anyone who might otherwise inherit the house would have a limited time to pay off the reverse mortgage, but the amount would be so considerable and a multiple of the initial advance that that heir would have to have a lot of money to pay it off.
Unless someone is really desperate and knows that his/her home will legally go to a reverse mortgagee on death, I think these are disastrous financial instruments, and exploit the elderly.
But there is a situation in which they could be helpful. If someone has no family, no potential heirs and no use for his/her house after death, it's a way to resolve the issue of house disposition by letting it default to a reverse mortgagee while exploiting the advance from the mortgage.
albertmcpherson, one major drawback to reverse mortgages is that once the owner dies or is placed into a continuing care facility, the mortgage becomes due and payable immediately. One has to read the fine print as to how long does one or the heirs have to pay off the loan.
When my boss' wife had passed on last year, he had only one month to either re-finance or to sell the house. So while he is grieving he is selling the house and looking for a new place to rent because he wasn't able to re-finance. Sadly he was harassed by the mortgage company that if the house didn't sell within such and such a date, it will go into foreclosure :(
I can't comment with the said company but all I can say is this, reverse mortgage is beneficial but just make sure that you can keep up with your home insurance, property taxes and other fees related to your home. Reverse mortgage definition according to revmortgage is turning your home's equity into cash without selling your house or incurring additional payments every month. You can use this funds to boost your retirement income, pay your healthcare or long term care expenses or pay your current mortgage.
Freq flyer is right. Reverse mortgages are a bad deal. It's just another way for banks to extract interest and fees, dressed up as a good deal and advertised with aging celebs to draw in seniors.
A reverse mortgage is expensive. There are fees and closing costs for setting them up. There is mortgage insurance to pay. If a person stays in their home, there is still the cost of upkeep. A reverse mortgage can allow someone to remain in their home, but a person with a normal house might be surprised at how little of the loan they are able to put in their pocket. Still, it can be a good option if someone has no heirs who want the house and are young and well enough to remain in the house for a long time. It would be a poor choice for someone who has heirs who want the house, or someone who will not live there long.
It is really important to read the contract carefully after shopping around for the best interest rates. Mortgage insurance will typically add another 1.25% on top of the interest. Things to pay particular attention to is when the mortgage will be called in -- upon vacating the premise or death? Are there any large final costs? What happens to the house? All of this, of course, is best done by an attorney.
One big question for me is if a person is older and has trouble paying the bills, can they really afford to keep living there. Owning a house is expensive. Perhaps they would have to hire a housekeeper and yard men to keep things up. There's painting and roof repair -- all the maintenance things that go into keeping a house up. Unless they are exempt, there is property tax. Someone considering a reverse mortgage should get out their calculator and see if it makes sense to try to remain in their home. Downsizing into an apartment may make the most sense for many.
I don't know anything about the companies. If I were doing a reverse mortgage, I would compare interest rates and conditions of the various companies, and hire a real estate attorney to protect me from making a costly mistake.
I give thumbs down for Reverse Mortgages to be used to pay bills. All that mortgage does is put the owner further into debt. Don't forget, a Reverse Mortgage is just that a *mortgage loan* that will need to repaid in the future, along with interest, and fees. As for one mortgage company being trusted or not, check with the Better Business Bureau.
I really believe that if a senior gets themselves into a bind money wise, it is time to sell the house and downsize. Find a rental at a senior community. Take that equity and put it into a money market that gives good interest payment.
No specific comments from me on a particular firm but some things to consider: Reverse Mortgages are very comples. A young person should be part of the fact finding. Make sure the house is NOT signed over to the mortgage company, that is an irreversible scam! Investigate ALL charges ---there are MANY in this product! Find a good company.
From a legal, financial and security perspective, I think reverse mortgages are financial traps and to be avoided at all costs. Have you ever read all the terms, as well as send the amortization schedules? There's a lot of hype with stars pitching these dangerous financial products, but they're like financial quicksand in my opinion.
The only reason monthly payments aren't required is because then they're compounded. Instead of paying down a mortgage, the mortgage balance increases, phenomenally. The amount increases every month. Then it would be very difficult for someone to pay it back.
You wrote that one could be used to pay a current mortgage. From my understanding a reverse mortgagee will pay off existing mortgages so that it holds a first place (priority) position as first mortgagee. There would be no other mortgages to pay off, nor would any legitimate mortgagee lend on a second and subordinate position because it would never be paid off.
Based on what I saw when reviewing one for a friend, they're reversely amortized. The interest is added onto the amount advanced, and compounded. Once you get a reverse mortgage, it would be literally impossible unless you hit a financial windfall.
As Flyer states, anyone who might otherwise inherit the house would have a limited time to pay off the reverse mortgage, but the amount would be so considerable and a multiple of the initial advance that that heir would have to have a lot of money to pay it off.
Unless someone is really desperate and knows that his/her home will legally go to a reverse mortgagee on death, I think these are disastrous financial instruments, and exploit the elderly.
But there is a situation in which they could be helpful. If someone has no family, no potential heirs and no use for his/her house after death, it's a way to resolve the issue of house disposition by letting it default to a reverse mortgagee while exploiting the advance from the mortgage.
When my boss' wife had passed on last year, he had only one month to either re-finance or to sell the house. So while he is grieving he is selling the house and looking for a new place to rent because he wasn't able to re-finance. Sadly he was harassed by the mortgage company that if the house didn't sell within such and such a date, it will go into foreclosure :(
It is really important to read the contract carefully after shopping around for the best interest rates. Mortgage insurance will typically add another 1.25% on top of the interest. Things to pay particular attention to is when the mortgage will be called in -- upon vacating the premise or death? Are there any large final costs? What happens to the house? All of this, of course, is best done by an attorney.
One big question for me is if a person is older and has trouble paying the bills, can they really afford to keep living there. Owning a house is expensive. Perhaps they would have to hire a housekeeper and yard men to keep things up. There's painting and roof repair -- all the maintenance things that go into keeping a house up. Unless they are exempt, there is property tax. Someone considering a reverse mortgage should get out their calculator and see if it makes sense to try to remain in their home. Downsizing into an apartment may make the most sense for many.
I don't know anything about the companies. If I were doing a reverse mortgage, I would compare interest rates and conditions of the various companies, and hire a real estate attorney to protect me from making a costly mistake.
I really believe that if a senior gets themselves into a bind money wise, it is time to sell the house and downsize. Find a rental at a senior community. Take that equity and put it into a money market that gives good interest payment.
Reverse Mortgages are very comples. A young person should be part of the fact finding. Make sure the house is NOT signed over to the mortgage company, that is an irreversible scam! Investigate ALL charges ---there are MANY in this product! Find a good company.