Get the Facts to Determine if A Reverse Mortgage is Right for You
By Carl Benefield, Pinnacle Mortgage, New Orleans LIVING WELL Magazine
Have you considered doing a reverse mortgage? Or, are you among the many seniors that have seen them advertised on television, but don’t know enough about them to make a decision. Or possibly you have heard some negative things about the product. For years, misconceptions and misinformation created a stigma around reverse mortgages. They were called predatory, confusing, expensive – and worse. Reverse mortgages have become a good solution for many seniors; however, that does not mean it’s the best option for all. There are many factors to consider when determining whether or not it’s a good fit.
We make decisions every day, and those decisions are based on information we have obtained through various sources. You wake up in the morning and you have to decide what to wear. Well, if it’s cold you may decide to wear a jacket or sweater or if it’s hot you may wear shorts. How did you know it was going to be cold or hot? More than likely you listened to the news or you pulled up the weather on the internet. The point is that some decisions are easy to make and some need research and counseling to make an accurate decision. Meeting with a trained reverse mortgage specialist is the only way to really determine if a reverse mortgage is an option to consider.
An initial meeting with a trained reverse mortgage specialist is very informal and consists of answering the senior’s questions, clarifying any misconceptions they may have about the product and determining if they qualify. At no time is pressure put on the senior to make a decision. It’s simply a question and answer session to determine if this is something that would beneficial.
Here are some common questions that come out of the initial counseling session:
What are the borrower eligibility requirements?
- 62 years of age or older
- Property used as collateral must be primary residence
- Completion of reverse counseling
- Sufficient equity in home
What costs are associated with getting a reverse mortgage?
- Loan origination fee
- Third party fees (i.e., appraisal, inspection, lender title policy, etc.)
- FHA Mortgage Insurance Premiums
- Interest
These costs seem high. Is there an option for reduced charges and do they have to be paid at closing?
- Yes, there is an option for reduced charges. Beginning October 4, 2010, HUD introduced the HECM Saver. The HECM Saver has significantly lower upfront fees than the traditional HECM. However, the lower upfront fees do result in less money being made available.
- If there is sufficient equity in the property then the closing costs can be absorbed into the loan.
How much will I receive?
- Age of borrower, appraised value, and interest rates determine the amount available, so it varies loan-by-loan
- Disbursements can be made in equal monthly payments or in amounts defined by the homeowner
- One time disbursement at loan closing
What are the homeowner’s obligations after the loan has closed?
- Occupy the home as principal residence
- Make timely payments of their property taxes and homeowner’s hazard insurance policy
- Maintain the property in a condition equal to when the loan was closed
I’m concerned with using up the equity in my home, but I can also see where I could have difficulty in making future mortgage payments.
- The benefit of doing a reverse mortgage is that you will never have to make another mortgage payment as long as you maintain the property as your primary residence.
- You are allowed to make monthly, quarterly or annual payments. This would help in preserving your equity, until there comes a time when you do not want to make payments.
The best decision is always an informed one and obtaining a reverse mortgage is a big decision. Local experts, like Pinnacle Mortgage Group, can help answer questions and guide anyone through this process.
Carl Benefield may be reached directly at Pinnacle Mortgage at 985-727-0755 (extension 5).