Comments on: How Much Does a Reverse Mortgage Cost?

By: John

John — Mon, 20 Apr 2009 14:49:03 +0000

Dawn,

As H L Mencken said “For every complex problem there is an answer that is clear, simple, and wrong.”

My house is paid for.

I have nobody to whom I want to give it.

My retirement income has been dramatically reduced by the current market downturn.

I can get some additional monthly income by using a reverse mortgage. Said monthly income will improve the quality of my life.

What is wrong with my reasoning?

Where am I being fleeced?

Where is the crime in my case?

By: Faith

Faith — Mon, 26 Jan 2009 22:31:03 +0000

I might have my mother do this as she is being sued for huge credit card debt. So I see the reverse mortgage as being possibly the lesser of 2 evils – allow the creditor to take the home in a judgment amount that grows until the home is sold OR get a reverse mortgage and pay the creditors off for peace of mind. The home equity is lost either way, but I don’t want the predatory lenders to get everything!

By: dawn

dawn — Thu, 06 Nov 2008 17:50:49 +0000

Reverse Mortages are wrong, wrong, just plain oh wrong. People who sale reverse mortages to our senior citizens are fleeing them and it’s a crime shame. Why would you encourage senior citizens to put their paid for home or near paid for home at risk, then sugar coat it. God have mercy on you.

By: Keith Howell

Keith Howell — Thu, 17 Apr 2008 01:07:31 +0000

None of these sites seem to address the costs I am looking for.
1. I would like a reverse mortgage based on how much I owe the current lender, not how much I can borrow.
2. If I chose to sell the house after x years, how much would I need to repay the lender. Obviously the initial amount plus, presumably, $y for every month the reverse mortgage was in effect. But what is y?

By: Larry Morris

Larry Morris — Mon, 10 Mar 2008 14:17:38 +0000

THe service set-aside covers the monthly serivice fee for a set period. This fee is usually $30-$35 per month. Since it is a Senior Loan, all fees are disclosed and broken out. A traditional loan has servicing fees, but they are added to the interest rate. Not so with a Reverse Mortgage. This money goes into an escrow account and is subtracted each month to pay the servicing company. If the senior sells, any funds left are refunded.

The mortgage insurance also protects the heirs and estate of the senior, as well as the bank. On a traditional mortgage, when the last survivor on the loan dies, the note is due. If there is a balance, it becomes a debt to the estate. Not so with a Reverse Mortgage. The non recourse feature prohibits the lender from coming after the estate.

By: Lord

Lord — Fri, 15 Feb 2008 00:14:10 +0000

Also, though your credit line goes up, so should the value of your home (at least in normal times).

By: Lord

Lord — Fri, 15 Feb 2008 00:11:38 +0000

While the service set-aside may not be charged up front, I believe it is billed as part of the monthly payment to handle the adjustable interest rate calculations and loan processing.

By: JLP

JLP — Thu, 14 Feb 2008 17:50:34 +0000

This is a comment from Corey at ForwardbyReverse.com. For some reason he can’t post comments on this blog.

Hello Charles.

Allow me to respond to your good questions. Selling the home is always an option a senior has. I don’t think anyone would tell you otherwise. The reason most seniors choose a reverse mortgage over selling is because they would rather remain in their home. They have an emotional investment in it, even more than a financial one. In every corner of the home, there is a memory. They are not necessarily looking for the best business decision, but the best personal decision.

Your scenario about a home being too big or too many levels is not always true. Sure, it can be. But believe me, a senior of sound mind knows their limitations. If they can’t navigate their home, they will move.

Remember, anyone who is “pro” reverse mortgage only talks about it as an option. At least, that should be their approach. Seniors should be aware of all their options. Not just the ones which make sense to you. Even if it’s not right for you, it’s a godsend to more and more people every single year. You should be glad it exists, even if you never need one yourself.

By: Charles Bowman

Charles Bowman — Thu, 14 Feb 2008 15:40:09 +0000

Why would you want to spend your whole life building up equity in your house only to reverse that trend later in life? If you need the equity in your house that badly, why not just sell the house? From what I’ve seen, these products are aimed at older citizens who have already retired. Selling the house would allow the owners to get ALL of the equity upfront to use as they see fit, with no fees other than possible Realtor fees. Sure, you no longer live in that home, but most people that age can no longer get around in the house as well (especially up and down stairs). Even if mobility hasn’t decreased, people who are at retirement age never need as large of a house as they did when they were younger. (No kids in the house anymore, for starters. Also, bigger house = more to clean.)

That said, how do these products compare to selling the house (and getting full equity) and either:
a. renting
b. buying a smaller house
and then investing/using the remaining equity?

By: Dennis Haber

Dennis Haber — Thu, 14 Feb 2008 14:24:44 +0000

JPG's musing should not be taken for fact. They really belie the true nature of the reverse mortgage. John rightly points out some key features of the program. However, the innocent comments by JPG could give one the impression that the program is not a good one. DennisHaber.com