Expert Column
Lisa Dunn 
Lisa Dunn is a licensed real estate agent in the state of Minnesota. While...read more
Articles In This Column
- How the Economic Crisis is Affecting Senior Homeowners
- Selling Your Home: How the Housing Crisis & Economy Factor In
- How Moving Can Save Your Parents Money
- Reverse Mortgages Pros and Cons
- How Can a Real Estate Agent Save Me Money?
- 8 Tips for Hiring a Great Real Estate Agent
- How to Hire a Realtor Who Specializes in Working with Seniors
- My Mom Needs to Move...I Think!
Real Estate for Seniors
Comments For "Reverse Mortgages Pros and Cons"
The advice you give at the end of your article is excellent. If a senior is doing research about whether a reverse mortgage is right for their situation, it is always a wise idea to get as much impartial information as possible.
I would like to add; that once a decision is made that a reverse mortgage is the right choice for someone, they should seek out an "EXPERIENCED" reverse mortgage loan consultant.
Since the implosion of the forward mortgage market and the current housing crisis, more loan agents from the traditional market have gravitated toward the reverse market in hopes of reviving their careers and earnings. Unfortunately most of them have little or no experience with reverse mortgages.
A word to the wise: If you are looking into getting a reverse mortgage, make sure you work with an experienced reverse mortgage loan consultant. Ask the loan agent how long he or she has been doing reverse mortgages and check their credentials along with their company’s credentials and licensing.
Reverse mortgages are complex instruments. Make sure you can rely on and TRUST the person you decide to give your business to.
Bravo, Taylor. Those are wise words, indeed!
All my best,
Lisa Dunn
Great summary and I just wrote an article on a similar topic. However, like credit cards, reverse home loans have to be used carefully and prudently. I am glad the regulations around these types of mortgages are much stricter.
I just printed this page out - reverse mortgages pro and con ---have you looked at the size of the print ? I am a senior and need larger print not smaller - just a thought.
Hi Sandra,
Thanks for your comment. Just so you know you can change the text size on your browser (such as Firefox, Internet Explorer or whatever program you use) by going into View on the Menu bar and changing your text size option. Hope that helps.
Can you still be employed to get a reverse mortgage?
I read your article to double check on the information I received from a reverse mortgage agent.
Since my husband passed away, the mortgage payments are too much for me to handle. My mortgage runs for another 25 years.. and I am 70 yrs old. I'm told that I will never have to make another house payment (as long as it is my residence), any closing costs or fees will be rolled over into the value of the reverse mortgage, I will not have to pay any fees upfront. I also chose a lump sum payment of just under $20,000 to pay off outstanding bills. This seems to be the right thing for me to do.
No raise in SS means more seniors will be lured into reverse mortgages. Don't do it! With home values falling still, the basis of your rev.mtg is ridiculously low. With few homes being sold there are no decent comparisons to be found. With so many foreclosures on phony mortgages, what do the unscrupulous mtg brokers do? They make you pay killer fees up front and force you to have their buddies do inspections and (un)needed repairs, resulting in held back funds and a meager loan that may not even cover your real estate taxes next year! These tricks are not mentioned on any website describing pros and cons of rev.mtgs. Beware!
Great article and advice. Thanks for giving balanced insight. Reverse mortgages are not for everyone but clearly some seniors are greatly benefited.
One point - in your list of disadvantages you state that reverse mortgages have adjustable rates. While this is true there are fixed rate products available.
Thanks, Rodney!
Congratulations, Lisa, on writing one of the most balanced articles I have seen on reverse mortgages! It is important for both advocates and critics to realize that the reverse mortgage product is not 'one size fits all.' For some, it is the perfect financial solution and, for others, it would be a poor choice. Thankfully, the requisite pre-loan financial counseling helps to make that line clear for homeowners before they have committed to a reverse mortgage contract.
I would add, too, to your advice about seeking advice from an unaffiliated third party: it is important to ensure that your contract for service with your 3rd party adviser be in no way contingent upon any part of your potential reverse mortgage transaction.
I am a 66 year old man. I am at this time debating to get a reverse mortgage or not. I think I will be facing foreclosure soon if I don't act now. I filled out a form to HUD and was contacted by Wells Fargo about the mortgage. I have seen what charges are, it is $13,000.00 added to my remaining balance on my home. The loan is a fixed rate of 5.4%, it also is covered by insurance if home value is less when house is sold. I have talked to many and seem to get mixed answers. I will be only one signing for this loan which leaves no one responsible for it. If I am deceased why worry. Any thoughts?
Great article, it is really good to see some balanced coverage on reverse mortgages. I have an article here that deals with some more disadvantages and advantages of reverse mortgages.
Julius
Mr. Williams,
I am not a licensed financial planner, nor do I originate reverse mortgages. I do have a few thoughts for you:
· How is your general health and how long do you expect you could stay in your current home without any assistance?
· If you stayed in your current home how long would the money from your reverse mortgage last?
· Would you be able to keep up with the taxes and upkeep of the home after the reverse mortgage?
· What would your plan be if in 5 years your health changes and you need to pay for additional services?
Since I am not the expert at reverse mortgages, I consulted with a trusted reverse mortgage specialist and this was her response:
Lisa, Regarding Mr. Williams: The main issue is that he is facing foreclosure and needs to do something soon, either sell the property or do a reverse mortgage to pay off what he owes. The reverse mortgage will stop the foreclosure process and allow him to continue living in the home without repayment for life, if he can keep up with the taxes, upkeep and insurance. He will gain the cash flow presently going toward his mortgage, but he most likely hasn't enough equity to also provide much cash in addition. Foreclosure, however, will leave him with nothing.
Selling in a down market and repaying his mortgage balance will most likely also leave him with very little cash to live on. He doesn't mention any financial responsibility for his heirs, other than making certain they will have no financial responsibility for this loan. I would recommend he do the reverse mortgage to ensure he can keep the home if, as you point out, he is likely to be physically able to continue living there for a long time.
I always point out to borrowers that there are 2 downsides to a reverse mortgage: the closing costs are higher than for a conventional mortgage (the mortgage insurance premium of 2% makes it non-recourse) and it uses up some of their equity through the years. It would appear that Mr. Williams does not really have another viable choice---and it would be a good answer to his problem.
Gail Wempner
Reverse Mortgage Specialist
ReverseMortgageMarketplace.com
My father (78) owns his home in full. He does not pay a mortgage. However, he cannot afford to live.
I have discussed the reverse mortgage option w/him. My question is can he still qualify for it if he is behind on property taxes at the residence?
JPelby,
He can absolutely still qualify. Generally speaking, a senior will qualify as long as there is some breathing room between their outstanding liens (mortgage, line of credit, tax sale) and the home's value.
Your father is actually a prime candidate since he owns the house outright and is a good deal older than the qualifying age of 62. In fact, with a Reverse Mortgage the older the borrower is the more he'll be able to qualify for.
Getting back on track - yes, he would still very likely qualify - and besides bettering his quality of life he'll be able to get those back taxes taken care of.
PS: Reverse Mortgages actually come in both a Variable AND Fixed option.
With a Variable rate you will most likely start out with a very low rate (2.7-3.7% has been the norm over the past few years) PLUS there are several options as far as the proceeds go: line of credit, monthly payments made TO the senior, immediate cash-out, or any combination of the three.
A Fixed product will provide rate stability, but the only option is to take all proceeds up front.
About three years ago, my parents took out a reverse mortgage and rec'd about $140,000 in a lump sum, which they have invested. Their latest statement showed they owed ~ $155,000 on the reverse mortgage. Since they took out their reverse mortgage, their house value has probably come down about 30%. If they would sell their home now, the proceeds would probably not cover the amount they owe on the reverse mortgage.
I understand, from reading about reverse mortgages, that no matter what their house sold for, they would not owe a dime on the reverse mortgage, even if the they proceeds were less than the amount owed on the reverse mortgage.
Is this correct?
Thank you,
MA
MilfordMark, your question is a common one that we see often. The answer to the question is that the writer is correct—the borrower would not owe a dime on the reverse mortgage beyond what the house sells for. As a result of the mortgage insurance premium, which the writer’s parents paid when they took out the mortgage, they are insured against the value of the home falling under what they owe. If the home sells for less than the reverse mortgage is worth, the FHA will make up the difference to the lender. Neither the writer nor his parents can be held responsible. I hope this helps. Please let me know if you have any further questions.
Thanks Reva. That confirms my understanding and gives my parents peace of mind.
Of course, I am not sure if all these upside down reverse mortgages will be causing another banking crisis when the insurance chips are called in. :-)