Your Questions About Reverse Mortgage

George asks…

What exactly is a “Reverse Mortgage” and what are the advantages and disadvantages?

admin answers:

The advantages are for the mortgage company and the disadvantages are for the homeowner. Stay away from this product it is full of fees and is usually a ridiculous interest rate.

Thomas asks…

Can you get downpayment assistance from the state of california or the federal govt for a reverse mortgage?

Is there such a program?

admin answers:

I think you do not understand reverse mortgages. If anyone tell you there are fees or a down payment needed for a reverse mortgage they are lies and cheats. Don’t walk – RUN away from them! Reverse mortgages, however, are rarely a good idea.

Here is what is supposed happen – you enter into a reverse mortgage say at age 70 on a 100K house. They think you will likely live another 15 years at most and they offer to pay you $450 a month for life. If you live longer than that they keep paying, however, if you doe they get the house without making anymore payments to your estate. So if you die after 1 year you loose the house.

A better option in most cases is to simply take out fixed rate second mortgage and use some on the money to make payments. This get you money you need and also helps protect the asset for loss if you do not live as long as you hope.

You need to talk to a financial planner – check to see if you bank has one and make sure this is a good idea for you

Daniel asks…

What are the pitfalls of a reverse mortgage,on a fourplex, that they live in?

admin answers:

Your question is somewhat vague, but I’ll try to give you an answer the best I can relating to revers mortgages! I don’t know how the fourplex has anything to do with it, but a reverse mortgage is instead of making payments on your house, you get the equity out of it without having to make payments!

A reverse mortgage can be great for a retired person who still wants to live in their own home who will most likely pass away before another move.
After the homeowner dies, the immediate family inherits the home and decisions have to be made because the family or beneficiary to the will have to either sell the home or pay back the amount taken out as equity in a reverse mortgage within a years time!

It is my understanding that this type of mortgage can only be used by a person in a single family residence and if your family member has a fourplex with a reverse mortgage on it, then rules have changed!

I would think rental income from the fourplex, even if the family member was living in one unit, would be enough to sustain them in their own home!

I would also do what ever you can to save and keep that piece of property bbecause a piece of income producing property is a great asset to have and keep in the family as long as members of the family can get along and maintain it!

The biggest pitfall of a reverse mortgage is the beneficiary of the person who passed away will have to pay ALL the money back with interest when the family member dies. You can put a new mortgage on the property and take out enough to pay off the cash amount the reverse mortgage paid out and this is how most people get out of the reverse mortgage, but you MUST do this within 12 months after the property owner is gone and you inherit it!

I hope this helped you!

Steven asks…

Can anyone out there respond to a question I had from a friend about reverse mortgage.?

She sent me a spreadsheet with 5 different choices. I need an opinion of which one is the best for her mom.

Pleae let me know your e-mail so I can send the spreadsheet.

admin answers:

Don’t do a reverse mortgage. It’s the worst thing an older person can do… Their home will just be stolen from them eventually.. Ugh bad idea

Robert asks…

Have any senior citizens ever taken out a reverse mortgage?How did it work out?Are you glad you did it?

I am considering getting one.I think everything has a down side,but I haven’t found one yet in that program.

admin answers:

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/mortgages/2007_22_revmortgage.html.

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.

Regards,

Stephen

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