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Are reverse mortgages really a good deal?
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A growing number of senior homeowners, age 62 and older, seem to think they are a good deal. Their popularity is increasing every year and is on record pace for this year.
A reverse mortgage is a special loan that can provide extra money to help seniors supplement their income - an increasingly important necessity considering today's rising costs, like health care. The reverse mortgage can provide a monthly check for the borrower for the rest of their life, or until they sell or move away from the residence. Or the reverse mortgage can be paid out as a lump sum or line of credit.
The most popular type of reverse mortgage is the home equity conversion mortgage, insured by the Federal Housing Administration. There were 76,351 of these reverse mortgages sold last year, up from 43,131 in 2005. The number of sales is obviously growing at a rapid clip, and a bill was passed recently by the U.S. House of Representatives that would temporarily suspend the cap of the number of HECMs that can be insured by the FHA. That cap is now 275,000 HECMs.
The key reason for the rapid growth in sales of HECMs is the dramatic increase in home values. In a very short time, equities in homes have increased substantially, making it possible for senior homeowners to access a larger flow of income from HECM payments. Also, rising costs of almost everything makes it more important to generate added income. And seeing the potential for added profits, more lenders are now offering reverse mortgages.
But are the a good deal?
Before rushing out to purchase a reverse mortgage, study it carefully and shop around to more than one firm offering it as the Terms and fees can vary greatly with different companies. Also understand the fees involve, because they can be substantial. Most lenders are quick to point out that the fees can be rolled into the loan, but they are still being paid which will reduce the amount of money that you will receive from the reverse mortgage.
posted by Charles Kirkendall @ 5:27 AM
9 comments
9 Comments:
I would beware of reverse mortgages..make sure you know what you're getting into.
UK Home Mortgages Guy
I am in the business, and the way I describe reverse mortgages is with this phrase, it is what it is.
They aren't good or bad, but they are proper for the right person. It is misleading to ask if they are good or bad because all investment vehicles are proper for a certain type of individual.
You should be careful when getting into anything that is six digits like a reverse mortgage is.
That said, I read an article in the USA Today this weekend that was terribly unfair to reverse mortgages and demonized them. This is the sort of reporting that spooks folks that should get into them. Here is how I analyzed it...
http://theeprovocateur.blogspot.com/2008/01/demonizing-reverse-mortgages.html
Hi there. If you are in California, at least, there is a good reverse mortgage broker that will certainly be sensitive about the fees required and will work with you on getting a reverse mortgage set up with minimal risks or troubles. Personally, I figured that with the value my home has already increased will not get much higher and perhaps come down a little. I'm goona weather this storm, and see where we are in a few years. You can get a free reverse mortgage quote here: Living in Reverse
Great post,
Reverse mortgages can be a great solution for seniors who wish to remain in their home but are having difficulty making their monthly payments and meeting other financial obligations.
Reverse mortgage operates in a manner opposite to that of the typical mortgage such as a home loan. In a typical mortgage, you borrow money in lump-sum right at the beginning and then pay it back over a period of time. In your payback -- the EMI -- a portion goes towards paying the interest and the remaining goes towards paying back principal. :)
LiveMortgageFree
"Before rushing out to purchase a reverse mortgage, study it carefully and shop around to more than one firm offering it as the Terms and fees can vary greatly with different companies." Perhaps I will take this advice co'z this is the most common thing to do if you wanted to be sure in any steps that you make.
Reverse Mortgages are not for everybody, but they can be a lifesaver for many.
Unfortunately, with the economic environment we now find ourselves in, more and more senior citizens will find a reverse mortgage to be necessary.
I would recommend reading everything you can and be a informed consumer before you even begin to shop for a lender.
I was searching for some reference regarding this matter. Good thing I've found your article. Great insight.
Many seniors need the reverse mortgage to supplement their income. With the devalued house prices, many might not get what they hoped for.
I truly like to reading your post. Thank you so much for taking the time to share such a nice information. I'll definitely add this great post in my article section.
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