Myths, Pros and Cons of Hecm Reverse Mortgages
Filed Under (Mortgage) by admin on 01-07-2009
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First and foremost; the bank does not, nor do they want to own your home. So why do so many people believe this? Prior to FHA getting involved in 1988, the lenders would take an equity position in their Borrowers homes. That practice has resulted in unfavorable feelings towards today’s reverse mortgages. The Federal Housing Administration (FHA) has set the new standards and guidelines for HECM reverse mortgage loans and their involvement has produced a safe, well thought out and balanced loan for Seniors. Look below to find some of the pros and cons of reverse mortgages.
The Upsides
- There are no monthly payments associated with a reverse mortgage. You will never be required to make a monthly payment while you reside in your home.
- You stay on title and any equity remaining in the property is yours. The lender does not take title to your home!
- You can never owe more money than your home is worth. HECM reverse mortgages are “nonrecourse” loans. This means that no matter how long you stay in your home, you will never be obligated to the lender to pay them any more than the value of the property, even if the loan exceeds the value.
- A reverse mortgage will not effect Social Security or Medicare benefits.
- Qualifying is easy. You must be at least 62 years of age and have value in you home. You do not not have to prove income or have good credit. The value of your home and your age determine loan amounts. It’s that simple.
- The money you receive from your reverse mortgage is tax free.
- The funds you receive can now be designed for your specific needs. Depending on the amount of funds you require, you can create your loan with a fixed or variable rate. You can also design your loan to provide one upfront payment of all cash, you can receive monthly payments or keep all of the funds due you in a line of credit and withdraw the funds as you need them. You can also create a combination of all three methods.
- The funds from a reverse mortgage may be used anyway you want. After paying off any existing mortgages, tax liens or heath and/or safety issues regarding your home, you can use the funds for any purpose you desire. Take a vacation, you deserve it. Make repairs or upgrades to your home. Put all the cash on 7 and spin the wheel, the funds are yours.
- You built the equity in your home over years of hard work, now you can let this equity work for you. You can feel the self reward and know that you are not necessarily reliant on your children or other family members to help you. There seems to be a since of pride that goes along with method.
- FHA insures these loans. Given the state of this economy, you do not want to find out that the bank funding your monthly payments has gone out of business. With FHA insuring your loan proceeds, you can be comfortable knowing that your next payment will be guaranteed by the US government.
- NRMLA. Lender/members of the National Reverse Mortgage Lenders Association are an elite group of individuals who are dedicated to helping American Seniors fulfill their retirement dreams. This group is available for you.
The Downsides
- Lenders generally charge their origination fees, FHA upfront mortgage insurance (MIP) and other closing costs that add up in a hurry. The flip-side to this, however, is that if you really need the funds from the equity in your home you could borrow the funds traditionally as long as you can afford the monthly payments or sell the property. If you sell the property, you are left without a home to live in and the 5-6% cost to sell your home is considerably higher than those fees assessed with a reverse mortgage. The longer you live in the property the lower the costs average out.
- Most reverse mortgages require utilizing a variable rate. This can be overcome by using a fixed rate. Unfortunately, the fixed rate reverse mortgage requires that you draw all funds available to you and may not be the right loan for all applicants.
- Your mortgage debt rises fairly quickly, but, there is no surprise that the loan increases rapidly since you do not make any payments while living in the property. The interest that would be due as in a traditional loan simply adds on and creates a new higher principle value.
- Borrowers are of course responsible to keep the property properly maintained and they must stay current with their homeowners insurance and property tax.
All in all I believe the upside to reverse loans far outweighs the downsides. Call on a NRMLA member and do your homework. Vist us online: www.mlsreversemortgage.com
Watch the video related to mortgage
Here’s the first episode.
Help answer the question about mortgage
What happens to a real mortgage when a debtor files for bankruptcy?I'm a creditor whose debt is secured by a real mortgage. I've received recently a notice that the debtor has filed for bankruptcy under chapter 7 of the US Bankruptcy code. What will happen to both my loan and my mortgage? Will I be enjoined from foreclosing the mortgage? The insolvent debtor by the way is an individual, not a corporation. Please prvide legal basis.
Thank you. 
uh wrong – the greedy banks let this happen. They are PRIVATE business. They are responsible for giving loans to people THEY feel can pay them back – they didn’t. They got f**ked. And so did we all.
youre a dumb ass yes they have control they open the gates so to speak. thats why they say it’s everyones fault but really it’s the people who open the gates. remember the zero down while that was bills idea.
Well this video and explanation has it’s flaws but it’s pretty good general explanation for those whom don’t need or care to understand great recession better.
read on…
http://myfinancetimes.com/2008/05/24/subprime-mortgage-creditcrisis/
The above article elucidates you on the actual subprime mortgage crisis in us. and the persons behind the mortgage fraud and all those who are to be directly blamed for this financial catastrophe.
depends on your interest rate
lets say you did a 30 year 5% fixed
1825.19 would be your monthly
http://public.propertylinx.com/custom/templates/mortgage_calculator.asp?price=350000
here's a calculator.. toss around your own numbers.
PMI protects the lender in case your loan goes into default. The only way to have it removed is when you owe less than 80% of your home's value.
That depends on a few things.
How much equity do you have in your current home?
What is your credit score?
What is your debt load?
Yes you can get a 2nd mortgage on your current home to buy another, people do it all the time.
Your income must support maintaining your current home (you should be able to get a renter in there to offset the mortgage payment or some portion there of) and support your new mortgage.
You can get a loan with a BK. Many lenders require it to be discharged for 2 years, however, there are still a few lenders that will lend on a BK only being discharged 1 day.
In a nutshell, yes you can, if all your other ducks are in a row.
Good luck
Sorry the content is very wrong. Didn’t hear “Government” at core of incentives and distortions from conceited, central planning politicians causing this bubble and crisis. Greenspan was exactly the opposite, too accommodating in the money supply available to lend and inflate the housing bubble. Better info by Wikis for CRA, GSE, Too Big To Fail. Govt. prodded banks to create sub-prime time bombs, pulled them to Fannie, “guaranteed” them to Wall St. All rational within perverse Govt. construct!
Can’t stop watching this.
Fascinating yet funny.
Furthermore does’nt the guy in this kind of look like Sam Harris.
creditreport.imess.net – try this service to boost you credit score before getting loan. After credit repair you can get the loan with minimal interest rate.
This was a GREAT video! A very simplified explaination for a started and now I can go elsewhere to find more details. I started with the others but they were too detailed and confusing and now this really, really helps! Thanks sooooo much!! Very well done.
don’t forget about jimmy cater then bill cilton they allowed all this or i think it was their idea
people would have had to realize that the opinion of a thing signifies choose between right and wrong opinion and when you learn to choose correctly and not to act as bulk reactions of people who chose wrong, simply learn to choose a good opinion and according to it once and not just watch.
After this financial crisis:)
1:20, Scrooge McDuck is scary:O
When a senior lien forecloses, a junior lien is wiped out.
So if the first mortgage holder forecloses, the second trust deed goes away. If the second forecloses, you'll still owe the first.
Oftentimes, if a senior lien forecloses, the junior lien holder will send a representative to the auction to defend its interests by making sure the property goes for enough to pay the junior lien as well. Or they buy it themselves with the idea of reselling. Costs money, yes. But better than losing their whole investment.
Speak to your lender about a FHA 203K loan. The 203K loan is sometimes refererred to as a "rehab loan". With a 203K you can have the kitchen/bedroom remodel costs put into your initial loan. The rehab must have estimates up front and also must be done by an approved contractor.
The home must be able to be appraised at the completed price. For example:
Say the home is listed at $150,000 and has an old outdated kitchen and bathroom. Before making an offer you get estimates from an approved FHA203K contractor for remodeling the kitchen and bathroom. The estimates come in at $30,000.
An appraiser will then appraise the home as if the remodel has already been done. As long as the home appraises at $180,000 you will be able to get the loan.
A big advantage to doing it this way is you do not need to have that $30,000 in hand or need to borrow the money later at higher rates. The rehab is done right away so you do not have to live with the outdated kitchen/bathroom. Your monthly payment on the loan on 150K vs 180K should amount to around $180/month additional.
barney frank,chris dodd,ACORN,and all other democrats forcing banks to give loans to PEOPLE WHO COULD NEVER PAY THEM BACK..
i do not see any problem with you getting the refinance and i would not worry about the business end affected it!!!