The Up and Down Side of the Reverse Mortgage
If you are a home owner, aged 62 or older, with a good amount of equity you have the opportunity to use a reverse mortgage to solve a financial problem.
It is definitely case by case in terms of whether the reverse mortgage is the right decision. For many it certainly is.
Those refinancing with the reverse mortgage can use funds in any manner they deem necessary. I find most are getting themselves out of their current mortgage to free up money. Others want to pay off debt or to supplement income.
It's pretty easy to see why the reverse is becoming so popular. Using this mortgage a borrower can solve their problem, not be forced to make payments to the bank, and never lose title to the home.
Furthermore both the fixed and adjustable rate products for reverse mortgages rival those charged for traditional forward mortgages.
You can look at the reverse mortgage from a bird's eye view and tell it is pretty strong. That doesn't mean it is all good. It certainly is not.
Quite simply closing costs are high. And they are high relative to traditional forward mortgages.
Why would that be?
Certainly one of the biggest culprits is that FHA charges mortgage insurance in the amount of 2% of the home's value. Other fees like the origination and title insurance are also based upon the home value.
It doesn't take much to see how these fees can total to a lofty number.
All things being equal a reverse mortgage is very strong. The costs are not equal and must be factored when considering a reverse mortgage.
Reverse mortgage companies provide a disclosure which discusses the cost of the mortgage annually. It takes into consideration these closing costs.
The nice thing is it covers how much the mortgage costs in the coming years.
You will notice the further you get away from closing the cheaper the loan actually becomes.
Because the upfront costs are high this document should help you determine if the reverse mortgage is truly a viable option for you.
It is definitely case by case in terms of whether the reverse mortgage is the right decision. For many it certainly is.
Those refinancing with the reverse mortgage can use funds in any manner they deem necessary. I find most are getting themselves out of their current mortgage to free up money. Others want to pay off debt or to supplement income.
It's pretty easy to see why the reverse is becoming so popular. Using this mortgage a borrower can solve their problem, not be forced to make payments to the bank, and never lose title to the home.
Furthermore both the fixed and adjustable rate products for reverse mortgages rival those charged for traditional forward mortgages.
You can look at the reverse mortgage from a bird's eye view and tell it is pretty strong. That doesn't mean it is all good. It certainly is not.
Quite simply closing costs are high. And they are high relative to traditional forward mortgages.
Why would that be?
Certainly one of the biggest culprits is that FHA charges mortgage insurance in the amount of 2% of the home's value. Other fees like the origination and title insurance are also based upon the home value.
It doesn't take much to see how these fees can total to a lofty number.
All things being equal a reverse mortgage is very strong. The costs are not equal and must be factored when considering a reverse mortgage.
Reverse mortgage companies provide a disclosure which discusses the cost of the mortgage annually. It takes into consideration these closing costs.
The nice thing is it covers how much the mortgage costs in the coming years.
You will notice the further you get away from closing the cheaper the loan actually becomes.
Because the upfront costs are high this document should help you determine if the reverse mortgage is truly a viable option for you.
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