A recent comment from our reader:
To whom it may concern:
I have read so many reverse mortgage info. It sounds like it’s not really to help you but for the bank to help themselves.
It’s designed to make you think they are helping you, but the truth is you are really giving away your home. You are selling it to them for a very low price.
If you get the reverse loan in Dec. 2012 and die in Jan. 2013 you have lost your home, you just gave it away your family can’t do anything about it and cannot have it even with a will.
My social worker told me his friend did that and they took his home from him because you must sign over your deeds to them and your home becomes theirs, they can do whatever they want to because the house are theirs.
So, I don’t know’ you better be really careful about peoples claiming they are helping you. Because it’s really themselves they are helping. they know if you are 62 and over you are already looking death close in the face.
The Truth is Title is YOURS.
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Top 5 FAQs
How do reverse mortgages really work?
A reverse mortgage is a loan that allows a homeowner to borrow money using their home as the collateral without the burden of having to make a monthly mortgage payment. This allows homeowners to access equity in their home without increasing their monthly expenses. The proceeds on a reverse mortgage can be used for whatever purpose the borrower chooses. The funds can be accessed via a line of credit, scheduled monthly payments, cash advances or a combination of these options.
Is a reverse mortgage a scam?
A reverse mortgage is not a scam. It is simply a loan that works in the opposite or “reverse” of a traditional loan. Instead of making monthly payments every month over a specified timeframe to pay the loan off, all interest and payments are deferred until the loan reaches maturity. This means the balance on the loan will increase over time rather than decreasing because you are not making a mortgage payment.
When is a reverse mortgage a good idea?
There are several instances when a reverse mortgage is a good idea for a homeowner. One of those is payment relief. If your current mortgage is too expensive to afford in retirement, the reverse mortgage may end up being the perfect solution to eliminating that expense from your budget to facilitate your retirement goals. Other instances include cash out for home remodel, additional funds for payment of taxes and home repairs in the future, preserving retirement assets such as 401K, IRA and other savings and sometimes simply to improve overall quality of life.
Do you pay interest on a reverse mortgage?
A reverse mortgage is in fact a loan and therefore there is interest charged on a reverse mortgage. However, you are not paying the interest on a monthly or yearly basis like you would with a traditional mortgage. The interest on the reverse mortgage is added to the balance and is not actually paid until the loan is paid off either by sale, refinance or other means.
What are the drawbacks to taking a reverse mortgage?
The drawbacks on a reverse mortgage can be that the closing costs can be higher than a traditional loan, the property must be your primary residence, the loan is not assumable and there may be less equity to leave to your heir as an inheritance. On the Home Equity Conversion Mortgage (HECM) program, there is an initial mortgage insurance premium charged by HUD which is 2% of the property value or max claim (whichever is less) which leads to higher costs for these loans than a traditional loan. It should be noted however that proprietary reverse mortgages have costs that are comparable and sometimes less than a traditional loan. When you have a reverse mortgage, the property must be your primary residence so if you have a reverse mortgage and want to move out of your home without selling it you would have to pay off the reverse mortgage before moving out. When a homeowner dies with a traditional loan, the heir can assume the loan and continue to make the payments on it to keep it in good standing. With a reverse mortgage, the loan becomes due and payable upon the last surviving borrower leaving the home permanently so the heir cannot assume the reverse mortgage and must address it via selling the property, completing their own refinance of the loan or paying it off by other means. Lastly, when you have a reverse mortgage your balance increases over time since you are not having to make a mortgage payment. This can lead to less equity in the home over time and therefore less of an inheritance for your heir.