Is The Reverse Mortgage Loan Costly
The reverse mortgage loan is targeted to seniors
, who have their homes as the only assets and who have no chance to loan more, because they cannot add their monthly expenses. These people are often called cash poor and equity rich.
The cash money from the reverse mortgage loan seems often to come from the thin air, which makes the seniors to forget the calculations and the thorough thinking. However, the reverse mortgage loan is a long term investment.
1. The Home Is The Only Guarantee.
All seniors,who are at least 62 and own their homes, where they have equities left, can qualify. Altogether three seniors can be the borrowers, but all must fulfil the requirements. The income and the credit information are not asked, because the home equity is the only guarantee to the loan.
2. The Security From The Mortgage Insurance.
The reverse mortgage terms include the item called the mandatory mortgage insurance. This guarantees that the lender will always get his capital and costs back and that the borrower cannot owe more than the value of the home. If the selling price of the home will not cover the capital and the costs, the insurance will cover the difference.
3. You Can Pay Away The Usual Mortgage With The Reverse Mortgage.
When a senior takes a reverse loan, he has to pay away the usual mortgage, if he still has something left. Only this will bring a big improvement to the senior, because the reverse loan has no monthly back payments.
4. These Are The Costs.
The list below includes the typical costs, but the exact amounts a senior will get from the offer of the lender. The compulsory mortgage insurance: 2 % of the appraised value, the origination fee, the cap is 2 % of the first $ 200.000 and after that 1 %, with overall cap of $ 6000, the title insurance, the title, county recording and attorney fees, the real estate appraisal $ 300 - $ 500, the survey ( in some cases ): $ 300-$ 500 and the monthly service fee, from $ 25 to $ 35.
5. The Mandatory Counseling.
A senior has to go through the federal counseling, that is the law. This meeting is very useful, because the counselor is free to recommend whatever solution for the senior, not only the reverse loan. These counselors are independent experts and not in the payrolls of any lender. A senior can take contact by phone, email or personally.
Whether the reverse loan is costly or not depends on the need a senior has and on the alternatives he has. If we look at the popularity numbers we can see, that the number of the seniors who have taken the reverse loans between 2005 and 2009 has tripled.
by: Juhani Tontti
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