Reverse Mortgage Good or Bad?
Checking out Reverse Mortgage Good or bad, Naughty or Nice
A reverse mortgage is available for Senior Citizens aged 62 or older. It is a mortgage. There is an interest rate charged, similar in rate to any other mortgage product. The payments are never due during the lifetime of the borrower or borrowers unless they leave occupying the home for a year. Then the payments are due, including interest. This is usually accomplished by selling the home or paying of the mortgage. Unlike a typical mortgage there is no monthly payment. The reverse mortgage can be paid off at any time.
Borrowers on a reverse mortgage can take the money in a lump sum, monthly, or even a combination of lump sum and monthly. A reverse mortgage can even be used to purchase a home, or an FHA approved condominium.
There have been some unscrupulous sales people that hurt the image of the industry. The most common abuse has pretty much been eliminated by the Fed’s rules. That abuse was to convince seniors to take the money from their home via a reverse mortgage and invest it in a risky investment, thus causing the seniors to lose their investment money and the equity in their home.
Having a to die for listing in Garden Towers in downtown Salt Lake City, a 2500+ square foot penthouse condominium and seeing how many people love it but are struggling with how to move down from a big home to a lock and leave smaller condo makes me realize just how tough the move down is on people. I do understand as Kathleen and I have gone through this process three times. There are important steps I will address but in this article I address one of them, the financing part.
If your next step is to purchase in the $200,000 to $3000,000 range the selection of condominiums is broad. There are however, in all price ranges, the perfect unusual condo, like the one in Garden Towers I have mentioned.
When the right home or condominium in this case comes around what do you do? You aren’t ready. One out of a hundred aren’t ready. Many don’t strike and lose the one they really wanted for financing reasons. They think they must sell their current home to make it work financially. They may not want to take on a new mortgage. They may not believe they qualify and the only way to buy now is to dump the current home.
Too many people miss the perfect new condominium with the thinking. The opportunity to strike now sometimes comes available with a reverse mortgage. There are no monthly payments with a reverse mortgage. The interest due accrues. The interest rate is competitive to normal 30 year mortgages. Reverse mortgages currently are easier to qualify for.
My advise after discussing the move down process is to consider a reverse mortgage as an interim solution to not missing out on that perfect lock and leave home or condo.
Reverse Mortgages can be a good thing. Educating the borrowers is a part of the Federal Rules. Click here for another post where I name five examples of when it is appropriate to obtain a reverse mortgage. Reverse Mortgage Good or Bad? Sometimes good, very good.
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