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Reverse Mortgage Information
Home Loan, Jumbo Mortgage, Compare Lenders
Are reverse mortgages a good deal? It depends…
More and older Americans are using the equity in their homes through reverse mortgages. They do this for a number of reasons but often it is because their income from retirement savings and Social Security is not enough to support them comfortably after they stop working. In other instances they need funds because of large medical expenses or some other sizeable expenditure they can’t or don’t wish to fund out of retirement savings. There are also a number of retirees that just want more spend able cash and wish to use the equity in their home to make their retirement years more comfortable.
You can fit all of these situations and more, but before you take out such a loan it's important that you know and understand what you're getting into.
What is a reverse mortgage?
It is similar to a home loan but instead of making payments to the lender, the lender makes payments to you.
The amount you can borrow depends on many things including your home's value, your age, the outstanding balance on your mortgage (if you have one), the going interest rate at the time you take out the reverse mortgage, etc. As a general rule, the older you are, the lower interest rates are and the higher your home's value, so the more you can borrow. - There are a number of ways you can take the moneys
- As a line of credit
- In a lump sum
- In monthly payments for the rest of your life
or some combination of all three.
Loan payments are tax-free and don't affect your Social Security benefits.
You don't have to repay the loan until you die or move out of your house.
If the value of the home declines and is not enough to cover the amount you've borrowed plus interest, that's the lender's problem.
Neither you nor your heirs are responsible for anything beyond the house-sale proceeds; however, you will not be leaving the “full” value of your home to your heirs (your, the borrower is not necessarily giving up “all” the equity in your home with this product - it depends on the size of the loan relative to the value of the home and how long you stay in your home after you take out the reverse mortgage..
You must be at least 62 years old to obtain a reverse mortgage. The older you are, the more cash you can get.
There are some down sides to taking out a reverse mortgage.
The costs of taking out a loan can be substantial, but are usually linked to the size of the reverse mortgage loan and not the value of your home.
You will not be leaving the value in your home to your heirs.
Lenders will only finance a portion of your home’s value.
For more information to see if a reverse mortgage is right for you go to:
https://www.newretirement.com/Services/Reverse_Mortgage.aspx
to get an idea of how large a loan you might qualify for under different programs, check out the reverse mortgage comparison calculator which compares lenders side by side
http://www.goldengateway.com/dothemath/trmcc
Reverse Mortgage Comparison Calculator
Compare lenders side by side
http://www.goldengateway.com/dothemath/trmcc/
More Information
Reverse mortgages are so-called rising-debt, falling-equity loans, meaning that as debt increases, home equity falls. Lenders recoup this debt -- the accumulated principal and interest payments -- when the home is sold. The debt can never exceed the value of the home, and any remaining equity returns to the homeowner, the estate or heirs.
Roughly 90% of all reverse mortgages are insured by the government through a so-called Home Equity Conversion Mortgage, or HECM. Those mortgages cannot exceed a certain amount, regardless of how much the house is worth. The remainder is not insured by the government. These are typically "jumbo" reverse mortgages tied to pricier homes, and they generally provide greater income, though at higher costs.
Lenders currently charge an origination fee of up to 2% of the home's value, not the smaller loan amount. A mandatory mortgage-insurance premium adds another 2%. Borrowers also pay various closing costs typical of a traditional loan. Thus, the upfront costs on reverse mortgage can exceed $12,000 for a $250,000 home. Pricier houses can mean combined fees that are even higher. Borrowers also pay monthly charges that can add thousands more over the life of a reverse mortgage.
Reverse mortgages put a bundle of cash into a consumer's hands, marking an enticing target for financial-product sellers to exploit. California, which originates more reverse mortgages than any other state, recently passed a law that, among other things, specifically bans mortgage lenders from pitching an annuity to consumers as part of the mortgage process.
How much a homeowner ultimately receives in a reverse mortgage is based on a person's age, the location and value of a home and prevailing interest rates. The older the borrower and the lower the rates, the larger the income. (You can gauge how much you might get from a reverse mortgage at www.rmaarp.com, an AARP site.)
Jumbo mortgages, which have no limit, provide greater income to owners of higher-value homes, regardless of the home's geographic location. The catch: These mortgages come with interest rates that can be as much as two percentage points higher.
Regardless of a home's worth, lenders will finance only a portion of its value. As an example a 68-year-old homeowner with a $1 million house could get a jumbo reverse mortgage of about $386,000. At age 72, a homeowner with the same $1 million house would get about $434,000 through a jumbo mortgage. At 80, the value jumps to $494,000.
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