Reverse Mortgage
The Complete Guide to Reverse Mortgages: Turn Your Home Equity into Instant Income!
by Tyler Kraemer

This book was so helpful in informing myself and my parents as to the options available for them. It was easy to read and easy to understand. It gave many helpful hints and helped us figure out if a reverse mortgage was approriate for them.

It is essential if you or someone in your family is considering, or wants to learn more about, a reverse mortgage loan. It walks you through the process from borrowing to repayment in a conversational, easy-to-read format. You can read about real life situations that are very helpful for you to see how a reverse mortgage can work for you.

The book provides precise information on each of the types of reverse mortgages that are available. You will find information about the ways in which you can receive your payments, and all of the incumbent fees and costs that may come with this kind of loan are revealed. It outlines how to protect yourself and how you are already protected. Checklists are provided covering all the points to consider before making each decision, such as how to choose a lender.

     

Reverse Mortgage - Reverse Mortgage

Reverse Mortgage * Reverse Mortgage

The Disadvantages of Reverse Mortgages   
Charles Kirkendall

A reverse mortgage can be an attractive option for many home-owning seniors that are having a hard time making ends meet. With a reverse mortgage, a senior homeowner will receive money for their home equity from a lender without having to make repayments for as long as they live in their home. So with the right reverse mortgage a senior homeowner can maintain their standard of living while retaining ownership of their home.

This of course, is the picture that all the reverse mortgage companies try to paint for prospective borrowers. Nonetheless, there are many differences that have to be understood between reverse mortgage's and conventional loans. If these differences are not understood, they can cause financial problems for reverse mortgage borrowers.

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Disadvantages of Reverse Mortgages.

The first disadvantage is the relative cost of a reverse mortgage. Reverse mortgages tend to be very expensive when compared with a conventional mortgage. This is due to the rising-debt nature of reverse mortgages. For example, a typical reverse mortgage may provide a homeowner with a $300 per month payment with a yearly interest rate of 12 percent compounded monthly. Over the course of ten years, the homeowner will receive $36,000 in payments, but will owe almost $70,000-almost twice as much as received.

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The second disadvantage is the complex and confusing contracts of reverse mortgages, that can have a tremendous impact on the overall cost of a reverse mortgage to the borrower. The complexity of the contracts often allow lenders and third parties involved in arranging reverse mortgages to not fully disclose the loan's terms or fees. These numerous other front-end and/or back-end fees can also quickly drive up the cost of a reverse mortgage. These fees can include origination fees, points, mortgage insurance premiums, closing costs, servicing fees, shared equity and shared appreciation fees.

Out of all these fees, the shared equity and shared appreciation fees should be avoided, as they can quickly raise the cost of the mortgage without providing any benefit to the borrowers. As an example, a shared appreciation fee can give a lender an automatic 50% interest in the difference between the current value of the home when the loan is signed and the appreciated value of the home when the loan is terminated. What makes the fees unfair is the fees have no relation to the amount that is borrowed.

The third disadvantage is the reverse mortgage payments can affect eligibility for old age pensions, Medicaid, or supplemental Social Security income. Senior's may not even realize this problem until after they already have their reverse mortgage, and only then do they find out that this can have the opposite affect on a seniors finances then what they were trying to accomplish in the first place by taking out the reverse mortgage.

Another disadvantage is the fact that reverse mortgages reduce the value of a senior's assets and estate. This will affect the amount of inheritance received by the borrower's heirs.

How to avoid these hazards

The best way for a senior to avoid these hazards is to be careful when choosing a lender, by obtaining bids from three separate lenders. They should take these contracts to a reverse mortgage counselor for evaluation. This will allow them to accurately evaluate the three contracts before deciding on best one for their situations.


Charles Kirkendall writes articles on reverse mortages and other senior financial issues. Visit reverse mortgages for more information and resources.

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Index of Articles about Reverse Mortgage

What Other Authors say about Reverse Mortgage

Reverse Mortgages - Are They Only For Suckers? by Felicity Walker

It sounds too good to be true- a home loan that you never need to pay back. No monthly repayments, nothing - for as long as you're alive or live in your home. Welcome to a reverse mortgage - it may sound...

Reverse Mortgages For Seniors by David Glu

Reverse mortgage has become popular in America these days, these are special type of mortgage that helps an homeowner to convert his home equity into cash, this boost up the American older financial security...

Reverse Mortgages Can Benefit Elderly by Search for classes

Reverse mortgages are available through lenders insured by the federal government and can be of great benefit to those who are eligible to apply. There are three types of reverse mortgages currently available...

Reverse Mortgage Information - Who Qualifies For Reverse Mortgages by Charles & Susan Truett

Reverse mortgages can be a great solution for seniors who wish to remain in their home but are having difficulty making their monthly payments and meeting other financial obligations. If you are over age...

Consider a reverse mortgage - as your last option by Tony Reed

Home buyers often save rigorously for their home, forgoing expenditures and making sacrifices to pay down the mortgage and save for retirement. At retirement they get to enjoy their dream home debt-free....