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What you need to know about Reverse Mortgages

Chris — Wed, 07 Oct 2009 12:07:29 +0000

When you first hear of a reverse mortgage, it is easy to become confused by the jargon that lenders use. These loans are quite complex, and finding out whether they are the best option for you takes a bit of research. The first step, however, is simply to learn more about what these loans are and how they work.
A reverse mortgage is a loan that is generally intended for seniors who need to supplement their Social Security or retirement savings. The loan is offered only to seniors who own their home outright or who have a low enough mortgage balance to repay their mortgage using the funds from the loan. The loan is paid as a line of credit, ensuring that the borrower can take funds as needed or it can be paid with scheduled payments as long as the funds remain available. The funds borrowed can never exceed the equity of your home.
Repayment of your reverse mortgage is not due until none of the borrowers are the primary occupants of the house. This means that even if you live in the home after funds are exhausted, your home cannot be taken away to repay the loan. The loan will simply become due at such time as none of the borrowers reside in the home.
When the loan becomes due, either you or your estate will be responsible for repaying the loan and any associated fees. If this is not possible, the home will be repossessed. It is important to understand this fact when considering such a loan.
A reverse mortgage can be an excellent way to supplement the cost of your retirement, provided that you understand all of the terms of the loan. As with any loan, it is very important to understand all terms fully and to ensure that you borrow from a reputable lender. When you understand how a reverse mortgage really works, it is easier to understand if it is the right loan for you.

Reverse Mortgages still an option of last resort despite hit on portfolios

Fri, 21 Nov 2008 20:02:03 +0000

As we watch the current financial turmoil impact even the most diversified of portfolios, and threats of inflation in the coming years increase with every bailout – unlocking the cash in your home via a reverse mortgage is still one of the least attractive financial moves you can make.
The AARP says with so many other options available to seniors – a reverse mortgage should only be considered when all other options are unavailable – and for good reason.
Consider the following:
In most states – home owners can borrow up to $417,000. Let’s use that figure for our calculations.
Borrowers pay a loan origination fee of 2% on the amount of their loan up to $200,000, and an additional 1% for whatever they borrow above that amount – capped at $6,000.
You’d also have to pay 2% of the loan for the mortgage insurance premium – or $8,340 in our example.

There’s more.

Add in a onetime fee for 3rd party closing costs estimated at $2,200 for our example, and before you receive a dime – fees are already $16,630!

In addition, lenders charge a monthly service fee, called the service fee set-aside – usually $20-$35 monthly and a monthly interest charge of maybe .5% per month. These can add on thousands to the final cost of the loan.

Most fees are deducted from the amount you borrow so they significantly reduce the cash you receive.

In fact – 63% of seniors who shopped for a reverse mortgage – decided against it because they knew they had other, better options.

The primary goal of the Life Settlement Network is to help seniors find the value in an asset they may not have known had any value. Unwanted or unneeded life insurance can provide a terrific cash infusion and is a vastly superior option to a reverse mortgage in most cases.