Finance Articles

Why a Reverse Mortgage May Not Be Good for Your Situation

Why a Reverse Mortgage may not be Good for Your Situation

By Don Seibert

There is a lot of chatter, TV ads, and magazine articles out there that sell the concept of reverse mortgages being the salvation for the monthly budget of a senior citizen. That is not always true! Reverse mortgages are a great thing for many, many retirees, but, depending on your particular financial situation, a reverse mortgage may really mess up your future financial plan and eat up all of your equity.

First of all, the up front costs associated with getting a reverse mortgage are far more than those associated with traditional mortgages. The requirement by FHA that you pay an origination fee of 2% and an insurance fee of 2% or the reverse mortgage amount is added to the loan costs that you would normally expect to see. With a reverse mortgage, you still have to pay for an appraisal, maybe a survey, a title search, credit search, attorney's fees, express fees, etc that you are accustomed to. If you are not very certain that you will still be living in you home after five more years, it will be real difficult to 'spread the cost' or amortize those expenses over the life of the reverse mortgage and still come out ahead.

If you were to stand back and view a reverse mortgage in comparison to a traditional home equity line of credit, you will find very few differences. They are both based on the equity in your home, but their costs are dramatically different. With a reverse mortgage, you can get the proceeds (after the home is paid off) as a lump sum, a line of credit or in monthly payments for as long as you live in the home. If you are considering refinance to improve your monthly cash flow, then the reverse mortgage wins, hands down. In most cases, you cannot achive this with a home equity line of credit. But if you are considering a reverse mortgage to pay a large medical bill or to meet anothe unexpected obligation, the home equity line of credit may be far superior to the reverse mortgage option. In this case, you would acheive essentially the same benefits without the huge up front costs, and probably do so at a lower interest rate (APR).

Another consideration that few people speak about is how a reverse mortgage eats into the equity that you have paid into your home up until now and dramatically changes the amount remaining to leave to your heirs. For many, they are so concerned about making ends meet until they pass on that this is not a concern. You have to do what you have to do. They view this as a 'pay me now or pay me later' situation. If you can improve your cash flow from now until you pass, you will prevent your children from having to support you in your later years - at the expense of their inheritance. These are trade-offs that need to be considered before embarkingon a reverse mortgage.

Part of the whole idea of reverse mortgages is that the insurance provided by HUD on a reverse mortgage guaranteed that the monthly payment to you from the reverse mortgage will be continues to you even if the lender goes out of business or if you outlive the reverse mortgage term. For expample, let's say you are 65 years old and take out a reverse mortgage on your home and that pays you $400 per month and the term of the mortgage is 25 years (used for computing interest). With the actuarial life expectancy continuing to lengthen, it is not unreasonable that you may live to be 93 years old. The HUD insurance will provide for continuation of your monthly $400 check even after you outlived the mortgage end at age 90 - as long as you continue to live in the home! Of course, if you become disabled or need to move into assisted living or a nursing home, the reverse mortgage would necessarily have to be paid off.

Therefore, you general state of health and your expectations for your later years should play heavily into your decision on a reverse mortgage. These are just afe of the things to consider when evaluating a reverse mortgage. You will hear a whole lot of hype and people promoting reverse mortgages. This usually comes from people eho make their living from selling reverse mortgages and you have to take that into consideration. Just remember the Law of the Barbershop - "Don't ask the barber if you need a haircut - you will probably get clipped!"

Reverse mortgages can be a wonderful option for many senior citizens. Just make sure that a reverse mortgage is right for you before moving forward!

Don Seibert is a retired business executive intimately familiar with real estate mortgages and the needs of senior citizens. His website is www.retiree-finance.com and it has More Reverse Mortgage Information and many more free articles related to home refinance for Senior Citizens.

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

Remortgage Serves To Rewind The Reimbursements Of Mortgage
It takes a mighty big effort to secure a home and even mightier to convert it into an earning member. Can a home be converted into an earning member? In contemporary configuration anything is possible! You must be aware of the advantages of mortgage, for you certainly have opted for that before going for a remortgage.

Mortgage Lender Enhances High LTV Home Loan Program for Borrowers
Primary Capital Mortgage adds features, flexibility for those seeking a high LTV home loan.

Buying a Home - Your BIGGEST Investment
This column has often focused on intangible investments like stocks that a young investor might hold in their portfolio. While these are one of the most important components of an investment plan, it is not the dominant one for most young people.

Inexpensively Protect Your Automotive Investment with a Car Cover
You've just purchased your dream car. After many months (or even years) of saving, you are now driving home from the car dealership and you suddenly realize, "How am I going to protect my new investment".

Real Estate Investing Firm Announces Fall 2007 Ripe With Real Estate Investment Opportunities
Real Estate Investments Firm, RealNet USA, announces that although the Real Estate Investing market may look uninviting to the untrained eye, Fall 2007 presents numerous excellent Real Estate Investing opportunities. The experts at one of the top Real Estate Investing companies in America are showcasing significant investment inventory to their investors at cut-throat prices.

The Holy Grail (of Investment)
Every year I go to the Money Show in Orlando, Florida. Thousands attend.

Document Management System in Mortgage Industry
In this article, we look at the critical importance of a good document management system in the mortgage industry. The emphasis is on understanding the document-intensive nature of the mortgage industry. We also look at the specific ways in which a document management system can help, and how a good DMS produces concrete business results in the mortgage industry.

Life Insurance Canada | Life Insurance Is Not A Dead Investment
Life insurance is an investment that many of us don?t like but still have to invest to safeguard your future But don?t you think that an investment that is going to safe guard your future is good

What You Need To Know When It Comes Reverse Mortgage Loans
When it comes to reverse mortgage loans you do not want to be one of the countless numbers of people who are tricked by their reverse mortgage loans. You need to do your homework and read the fine print. Know what you are getting before you make the decision that a reverse mortgage is right for you. By being informed of the process and details that a reverse mortgage entails you are less likely to be tricked by a lie; because you will know the truth. The more you know about reverse mortgage loans, the better off you are when it actually comes time to getting your own reverse mortgage.

Foreclosure Investing: How to Do it Without a Huge Investment
There are an incredible number of scams that promise you can make huge returns on foreclosure and pre-foreclosure investing without using a cent of your own money They take the form of supposed "investment clubs," expensive how-to courses, books and e-books

Advantages of an Online Mortgage Quote
There are several advantages when getting an online mortgage quote. First fast, easy, and quick response. Second you have ability to shop around with more than 1 mortgage prospect, and some services shop around for you! Unlike traditional mortgage quote you will not get bombarded with phone calls from 30 different lenders, only the 1 you choose to contact you.

Forensic Accounting Certification
Forensic accounting. Sounds like something out of an episode of CSI meets the IRS, right? If you think so, then you?re probably not currently looking for forensic accounting certification, but if you are?or you find after this article that forensic accounting interests you?there are a few things that you need to know.

How To Shop For The Best Utah Mortgage Refinance Rate After Bankruptcy
Anytime you are looking to spend a large amount of money on something, it is a good idea to shop around for the best price. The same theory holds true when shopping for a Utah mortgage refinance after bankruptcy.

In-Q-Tel Completes Strategic Investment and Technology Advancement Agreement With Forterra Systems to Accelerate Collaborative Virtual World Solutions
Forterra Systems, the market and technology leader in private virtual worlds, today announced a strategic investment and technology advancement agreement with In-Q-Tel, the independent strategic investment firm that identifies innovative technology solutions to support the mission of the broader U.S. Intelligence Community.