The Finance Blogger


Reverse Mortgage issues for Seniors

March 7th, 2012 ernie Posted in Reverse Mortgages No Comments »

Reverse Mortgage issues for SeniorsBack in August we wrote a post about reverse mortgage loans describing what they are and how some people can use them. We tried to be as factual as possible and we tried to describe the overall process. We are not in the business of providing reverse mortgage loans of any kind. We decided to do another post about the subject, this time titled Reverse Mortgage issues for Seniors. We should also mention that as a writer we are against reverse mortgages when they are arranged by many of the companies that we found on the internet. I am sure that there are many reputable companies out there, but you must also be very careful.

Reverse Mortgage issues for Seniors – Sales and Marketing

The first thing that everyone should remember is that all of these names are just marketing names to put you in the right frame of mind when you are dealing with a lender. For example what is the difference between a loan that let’s you draw on it whenever you need cash and pay it off whenever you have cash vs. a reverse mortgage? These type of loans sometimes go by the name Powerline Loans.

Reverse mortgages and powerline loans are much the same except in the case of the powerline , the customer is in control of how much they borrow. In the other it is all automated and set up for you.  Personally I like to be in control of my finances and not some institution which I can only talk to via the phone and even then I get a person in a call center that is hundreds or thousands of miles away.  I have everything automated and do all banking electronically. But I still like to be able to go to a solid brick and mortar type bank to discuss any issues that I have.

A Payment Every Month

Back to reverse mortgage loans. These loans typically send you a payment each month and the interest is calculated monthly which is added to your balance. Both the interest and the monthly payments can add up quickly so you need to plan carefully before choosing this option. While they say you will never be forced to sell your home, they certainly do want the loan amount owing when you do sell or move to another location. If you pass away while participating in a reverse mortgage, then your estate will have to sell the home and repay the balance owing at that time.

As a senior,  having this monthly income can be very helpful to pay bills and augment your total income. It may mean the difference between living extremely frugally and a comfortable retirement or having to move to some other place which you are not comfortable with. It is difficult as a senior to deal with moving homes and dealing with finances that seem to get increasingly complicated. There are a large number of very fast talking sales people who may put pressure on you to take the deal. Never take it on the first meeting and always take someone you trust with you to take notes and help with the decision making.

Important Decisions

This is a really important decision to make financially as well as life style. Do you stay in your own home and build up debt or do you move to another place and buy a less expensive home or do you pay rent? We will discuss some of these options in our next post – Seniors – Sell, Rent or Stay

If you have been dealing with a reverse mortgage and have comments about them either way, please leave a comment. I am sure our readers will be interested in what you have to say about them!

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Reverse Mortgage Loans

August 7th, 2011 ernie Posted in Reverse Mortgages No Comments »

Reverse Mortgage LoansMany people are wondering how these Reverse Mortgage Loans work and whether they are a viable option for them.  They may have all of the equity in their homes and little savings outside the home. They need money to live on and either have to sell their home which they have lived in for many years or find another solution.

Fortunately, Reverse Mortgage Loans offer another solution to moving, selling or renting a home. They can stay right were they are and avoid the stress of leaving the home they may have lived in for many years.

Here is how they work!

How Reverse Mortgage Loans work?

A reverse mortgage loan is the opposite of a traditional mortgage that you might have on your home. Instead of making monthly payments, you use the equity that you have built up in your home to generate income that you can use for personal use, paying bills and other living expenses, or just going on a trip or for medical expenses. Many seniors have a lot invested in their homes in terms of equity. They can draw on this equity from their home by using a reverse mortgage.

Eligibility for a Reverse Mortgage Loans

  • Applicants and borrowers must be 62 years or older
  • The applicant must own their own home outright, or have a low mortgage balance (any mortgage balance is paid off at closing with proceeds from the new reverse loan)
  • There is no income restriction
  • The home you are borrowing against must be the one you live in year round or in other words it must be your primary residence

Payment Disbursement Options

  • Lump sum payment to you, after existing mortgage balance if any is repaid
  • Monthly installments, based on repaying your existing mortgage first.
  • Line of credit, which you can draw on as needed up to the approved amount

Additional Important Details Regarding Reverse Mortgage Loans

  • You retain ownership and occupancy of your home
  • Closing costs and fees can be financed as part of the loan
  • When the loan is due, your heirs have choices: they can repay the loan and keep the house, or sell the house and repay the loan
  • Interest is paid at the time the loan is repaid and the interest may be tax deductible (consult your tax adviser)
  • You will never owe more than the current market value of your home

Reverse Mortgage Program Option

This is a financial option that may appeal to many homeowners who need money and would prefer to take advantage of this option instead of moving to an apartment or some other location. There are issues which people considering this option should take into account.

Issues

  • Use a lawyer to make sure that the mortgage is properly recorded
  • Use a bank that offers these mortgages
  • Avoid using firms that may not be recognized by the Federal Government
  • Recognize that when you finally do sell, there will be less equity available
  • Take Reverse Mortgage Loans into account when planning your estate
  • Consult with an expert financial planner , bank manager prior to making a decision
  • Consult with several experts to get more than one opinion regarding Reverse Mortgage Loans

 

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