Originally Answered: Can someone explain to me the Pros's and Con's of a "Reverse Mortgage? I am 74 years old and considering i?
I'm a Reverse Mortgage Specialist!
A reverse mortgage is a home equity loan for people aged 62 and over. (I don't like being called a Senior Citizen or even worse, a "Senior", so I never use it.) We're able to lend you a percentage of the value of your home. Out of that amount, we need to pay off your mortgages, lines of credit, home equity loans, tax liens...anything creating a lien on the property. There are substantial closing costs on a reverse mortgage because there's an origination fee and mortgage insurance (which actually benefits the borrower, unlike regular mtg ins).
You wouldn't have to make a payment to the lender as long as you live in the house. You would pay your real property taxes, if you have any, and your home owners insurance, but you wouldn't be required to make a mtg payment. You can make a payment if you want, no prepayment penalty, so if you want to make any amount of payment at any time, you can. You are still the owner of the home, and you can sell it anytime you want. You also decide who will inherit your home. Your heirs have the same options they do when inheriting a home with any kind of mortgage: they can pay it off with whatever money they have; they can sell the house and pay from proceeds, any additional proceeds are theirs; or if someone wants they house they may be able to refinance into their own names, but their income and credit and assets and debt ratios will be considered.
On the reverse mortgage, those factors will not affect your eligibility. We do have to pull credit reports to comply with the Patriot Act, but we consider 3 other things to get started on this.
1. All owners must be at least 62 years old and the house must be their primary residence. You "can" remove a younger owner's name, but we strongly advise you to consider what will happen if the mortgagor dies...the loan will be due, and the other person is now an heir, not an owner. Be sure you plan for that contingency, or your younger spouse could end up looking for a place to live.
2. The type of structure must fit the guidelines: 1 to 4 family homes, most condos, and manufactured homes that meet the rigid FHA guidelines. We specifically can do some coops in the NYC area with our proprietary product, but the percentage you get is miniscule.
3. The amount available to you must be enough to cover your mortgages and closing costs. You can pay the difference if it's not, but you have to decide if it's worth it.
This is a wonderful loan for people who need it. If it comes to getting a reverse mortgage or losing your house, no doubt this is the better option. If your children are worried about not getting any inheritance, forget about them. They should worried about how you're enjoying your retired years.
The AARP has a list of lenders. I'd tell you to call me, and I'd send you an information package, but this forum is NOT a place to solicit business, although you see it all the time. I thought I had a phone number for AARP on my desk, but I can't find it, and it's almost time to go home.