I have to wonder what people sometimes think. Confidence is down but spending is up. The recession isn't really a recession but for many it seems like one.The media talks of millions of homeowners looking for mortgage relief, being foreclosed or worse, are feeling the crush of owning a home adversely impact their retirement plans. And yet, some people are still planning a future with their house as part of the process.
Could be a sign of the times and then again, it might be the progression of where we would be in our retirement plan. If the results of the latest Associated Press-LifeGoesStrong.com poll are any indication, we have reached a pivotal point in retirement planning. Should I stay or should I go?
A great many retired couples have told me over the years that the biggest mistake they may have made was selling the family home. They have opted for a dream instead and chased it with their new found retirement freedom. But many failed to take into consideration that a place is more than just a shelter. It can be proximity to children and grandchildren, services such as health care facilities or other seniors and often, in communities that are growing with younger cohorts.
And almost equally as many have found the size of the house they own in their pre-retirement years is simply too large to accommodate - or worse, afford.
Should it be a surprise that we begin making post-work plans in midlife? Or is the surprise the decision we make?
According to the recent Associated Press-LifeGoesStrong.com poll, three out of ten midlife retirement planners are suggesting that they will look elsewhere when they do retire. And according to the poll, they are resigned to sell the family home for less than what they had thought it was worth a decade ago.
But that is understandable for two reasons: those out-sized estimates of property worth have been adjusted to fit a lackluster economy and there is a greater chance that the equity they may have calculated has shrunk due to refinancing.
Folks in the midwest are more likely to stay put, more so than their east coast neighbors.
The poll also suggests according to Barbara Corcoran: "more than four in 10 want a smaller home, 30% would like a different climate, 25% will look for a more affordable home, and 15% will pack up our bags for the sole purpose of moving closer to family." And when they do move these people dream of a one-level home with enough room to accommodate the occasional visitor, close to medical facilities and not in-city.
And those that stay put waste almost no time converting their children's rooms into something more focused on their evolving interests.
Oddly, the question of taxes didn't come up in the poll, something of major interest to older people planning on a fixed income lifestyle. A larger home requires upkeep and maintenance that might not configure into a retired income. And the thought of a second home was not amongst the wishes this group had either. In fact, only about 12% want to feel the sea breeze in their graying hair.
The question is: how much of a role should your home play in your retirement plan? Many people have factored in the equity in their plans - or at least they used to - and the mistake made by these folks is twofold. One, you need to live somewhere and two, unless you own your home and have considered the chance that you might reverse the mortgage at some point. this equity is nothing but paper dreams.
A harsh reality but more true than not.
If you are factoring in your home as part of an estate, then no doubt you have made all of the considerations, tax and otherwise, surrounding that decision. But if the home will become unmanageable (how hard is the upkeep now?), then looking for the opportunity to sell it, no matter how much you might "love" the house, the location, the neighbors, should be weighed.
As retirees approach that magical time when you either cutback or stop working altogether, the best advice woud be to begin to stage the sale of the property now while your income is less fixed. If you don't sell, you will have a slightly improved place. If it does sell, it will help you get the price, or closer to the price you might think it is worth.
Showing posts with label reverse mortgages. Show all posts
Showing posts with label reverse mortgages. Show all posts
Friday, October 28, 2011
Thursday, June 30, 2011
Throwing Your House into Reverse: Not a Mortgage for Everyone
American dream or not, the games you may have once played with financing your home are not available for the vast majority of homeowners. And there is no doubt that this a good thing, a lesson learned that was far too painful but often, those tales are. But there is another game afoot in the world of mortgages, even as the largest lenders pull the plug on the process: the reverse mortgage.
Most of us don't envy those who are toying with this option. We know two things about these folks: one they own quite a bit of their house, referred to as equity and two, these homes are owned by cash-strapped people older than 62.
The reverse mortgage is a rather simple product with relatively simple goals. Because those who are considering this option are often older and in possession of much of the house they live in. This pool of cash is a very tempting option to a fixed income or one where retirement savings no longer is able to keep up with the cost of living. There are a variety of reasons they may need to tap this cash in their homes from medical bills to simply poor money management.
So the concept of tapping some of that equity is quite appealing. A reverse mortgage essentially gives you the money that your house is worth. Ron Lieber recently visited this topic in the New York Times explaining "reverse mortgages begin with a lender that is willing to pay you instead of you paying the bank. How much you get depends on your age, prevailing interest rates and the amount of equity you have in your home. The payout may also depend on whether you choose a lump sum, a line of credit, a regular payment for as long as you live or a regular payment for some fixed number of years."
The problem is getting a lender to do that. Many of the biggest banks have pulled away from offering the product, not because they don't think it is a good idea. But because those they lend the money to tend to fall behind on key elements of the loan agreement: paying taxes and keeping the house in sale-able condition. Aside from a check with the feds, there is no credit check on the applicants.
So banks, seeing the issue of foreclosing on granny because she opted for the lump sum payout and failed to keep current on those obligations have decided the bad PR will come with too steep a price. So enter the second and third tier lenders who will, without a doubt fill the void.
This could create several issues. The first would be fewer loans or on the flip side, loans that revert back to why this type of mortgage got its bad rep in the first place. Fees will be higher in a space with fewer competitors. Elderly will sign more complicated documents that will force them to maintain a fund for emergencies - which on the surface isn't a bad thing but could turn turn out to require higher funding balances than needed, leaving the reverse mortgager with less cash for the effort.
Another issue might be in how your heirs feel about the whole process. Often, parents,who may have mentored their children on the subject of money and financial prudence and who now find their finances in need of some review, may not be willing to or may be too embarrassed to ask for help. If there is no dialogue, the whole process might come as a surprise for kids who thought that house would eventually become part of the estate. And once these second and third tier lenders begin the process of foreclosing, it is often too late for the children to step in to help.
There are some key things to consider here. The first is what options do your parents have? Can they downsize? If not, can you talk to them about the options? Often this conversation needs to happen but it also needs to approached with great care and consideration. But once the barrier has been breached, you can move to include yourself in their financial affairs before it is too late.
This is also some tricky water to navigate. But the effort is worthwhile. If they need the money, and many older Americans will, attempt to get them to allow you to help budget the funds. In the future, HUD will probably set rules about creditworthiness and because many older Americans have little or no recent credit history, this might prove an obstacle at a time when they are already facing one too many. Helping them build some creditworthiness will enable them to be in a better position - with your help - to get the best deal possible.
Once you have gained their trust, you can include your input with their financial planners, with their attorneys and possibly with their medical doctors, all of whom may not be able to tell you what their clients or patients are deciding. You can take control of the vital payments that need to be made and keep things in good financial order.
So this summer, take a moment when visiting your parents or grandparents and have the discussion. And while you are at it, consider a plan to pay off your mortgage as well. (You can find recent articles about this topic here.)
Most of us don't envy those who are toying with this option. We know two things about these folks: one they own quite a bit of their house, referred to as equity and two, these homes are owned by cash-strapped people older than 62.The reverse mortgage is a rather simple product with relatively simple goals. Because those who are considering this option are often older and in possession of much of the house they live in. This pool of cash is a very tempting option to a fixed income or one where retirement savings no longer is able to keep up with the cost of living. There are a variety of reasons they may need to tap this cash in their homes from medical bills to simply poor money management.
So the concept of tapping some of that equity is quite appealing. A reverse mortgage essentially gives you the money that your house is worth. Ron Lieber recently visited this topic in the New York Times explaining "reverse mortgages begin with a lender that is willing to pay you instead of you paying the bank. How much you get depends on your age, prevailing interest rates and the amount of equity you have in your home. The payout may also depend on whether you choose a lump sum, a line of credit, a regular payment for as long as you live or a regular payment for some fixed number of years."
The problem is getting a lender to do that. Many of the biggest banks have pulled away from offering the product, not because they don't think it is a good idea. But because those they lend the money to tend to fall behind on key elements of the loan agreement: paying taxes and keeping the house in sale-able condition. Aside from a check with the feds, there is no credit check on the applicants.
So banks, seeing the issue of foreclosing on granny because she opted for the lump sum payout and failed to keep current on those obligations have decided the bad PR will come with too steep a price. So enter the second and third tier lenders who will, without a doubt fill the void.
This could create several issues. The first would be fewer loans or on the flip side, loans that revert back to why this type of mortgage got its bad rep in the first place. Fees will be higher in a space with fewer competitors. Elderly will sign more complicated documents that will force them to maintain a fund for emergencies - which on the surface isn't a bad thing but could turn turn out to require higher funding balances than needed, leaving the reverse mortgager with less cash for the effort.
Another issue might be in how your heirs feel about the whole process. Often, parents,who may have mentored their children on the subject of money and financial prudence and who now find their finances in need of some review, may not be willing to or may be too embarrassed to ask for help. If there is no dialogue, the whole process might come as a surprise for kids who thought that house would eventually become part of the estate. And once these second and third tier lenders begin the process of foreclosing, it is often too late for the children to step in to help.
There are some key things to consider here. The first is what options do your parents have? Can they downsize? If not, can you talk to them about the options? Often this conversation needs to happen but it also needs to approached with great care and consideration. But once the barrier has been breached, you can move to include yourself in their financial affairs before it is too late.
This is also some tricky water to navigate. But the effort is worthwhile. If they need the money, and many older Americans will, attempt to get them to allow you to help budget the funds. In the future, HUD will probably set rules about creditworthiness and because many older Americans have little or no recent credit history, this might prove an obstacle at a time when they are already facing one too many. Helping them build some creditworthiness will enable them to be in a better position - with your help - to get the best deal possible.
Once you have gained their trust, you can include your input with their financial planners, with their attorneys and possibly with their medical doctors, all of whom may not be able to tell you what their clients or patients are deciding. You can take control of the vital payments that need to be made and keep things in good financial order.
So this summer, take a moment when visiting your parents or grandparents and have the discussion. And while you are at it, consider a plan to pay off your mortgage as well. (You can find recent articles about this topic here.)
Wednesday, March 26, 2008
Retirement Planning and the False Hope of Reverse Mortgages, Part two
As fate would have it, there was a front page story in the New York Times today suggested counseling for a mortgage holder who had fallen behind in his payments on a new row house in East Baltimore. Only the mortgage holder in question was 75.
According to the article, this 75 year old man and his wife had purchased the home in 1988 for $55,000 and refinanced it in 2006 with an adjustable rate mortgage that, like many of these sad tales tell, raised the payment to untenable levels. They missed a couple of payments as a result.
Now what does this have to do with reverse mortgages? And, who lends to a 75 year old man?
Yesterday, in response to an entry about reverse mortgages, Cory Matelli a reverse mortgage specialist took me to task. His comments basically focused on my lack of facts and figures and politely asking me to not make blanket statements about an industry that is his livelihood.
He wrote the following, with my comments at the end.
"Thank you for your article. While I don't agree with entire presentation quoted in the article you featured in your post, I also take exception to some of what you wrote, as well.
"You make a blanket statement that people don't use the proceeds from their reverse mortgage for maintenance or home improvement. How do you know this? Each borrower and their needs are different. There is no way you can make such a statement without knowing the individual borrower.
"You make another blanket statement that equity "should not be used" for day-to-day living expenses. I would agree with you if you're talking about someone in their 30s, 40s or even 50s, but when you're talking about retired seniors in their 60s on up, it very well may be the perfect avenue to help them with those very things.
"In most cases, seniors have lived in their homes for decades and have built an enormous amount of equity. Today, the senior homeowners throughout the United States combine for over 2 trillion dollars in home equity. When a senior has chosen to age in place, meaning they desire and intend to live the rest of their lives in their home, the infusion of cash generated by a reverse mortgage can be the very ticket to financial independence.
"It's easy for people to press the panic button and compare something they don't understand to something which is notably troubled, such as the sub-prime mess. For a variety of factual reasons, there is no comparison.
"None.
"You make an issue about reverse mortgages not "advertising" interest rates and fees. I don't know about your marketing knowledge, but most effective advertising you see plays up the positive aspects of a product. I've never seen a conventional mortgage advertisement that broke down the fees, either. The fact is, current interest rates can be found under 5%. Fees by the lender are comparable to conventional mortgages. The key is that HUD charges 2% for mortgage insurance which can double the up front cost. All of these details are disclosed and given to prospective borrowers.
"Ok, I've gone quite long in my reply. In closing, I want to say that I can see you are interested in the best interest of seniors, as am I. I have seen, first hand, the incredible positive impact seniors have enjoyed in obtaining a reverse mortgage. 93% of seniors surveyed by AARP indicated that their reverse mortgage had a positive affect on their lives.
"Just be careful when making blanket statements. As with all loans, reverse mortgages are not for everyone. But for whom they are appropriate, they are a godsend.
"Have a great day."
Thank you Mr. Matelli but that is not what I was questioning. So I replied, "True, each borrower is different. But you do not offer any statistics on who gets these types of loans or how they can attain financial freedom! Living in place has a warm and fuzzy tone but the truth is, no lender will give you what you think you deserve.
"Consider the following calculations done using my zip code on a $400,000 with no mortgage and no liens. The most available as cash is $171,280 through FHA and $62,289 from Fannie Mae. Monthly payments amount to $887 and $510 respectively.
"True, no other lender advertises the closing costs but neither do reverse mortgage lenders talk about the MIP (Mortgage Insurance Premium) at 2% (of the appraised value of the home - not the loan) or 0.5% limit on the premium. Some of the upfront fees have totaled $14,000 or more. Banks charge upfront fees of 2% or more on the home's value (in addition to HUD) and levy annual servicing fees. Nowhere have I seen a 5% rate as you suggested.
"Even though I used a $400k figure, this exceeds the limits currently available (FHA loan limit varies from $200,160 for rural areas to $362,790 for high-cost areas).
"You say there are a variety of factual reasons why this does not compare to the sub-prime mess that I suggest this could become but you offer no facts. Each year, the amount of reverse mortgages has climbed with the latest figures available showing more than 85,639 homeowners taking advantage of these types of loans in 2006. That's nearly double the amount from the previous year. That is due to aggressive promotions done by an industry fixated on making money.
"The average age of those seeking reverse mortgages is 73.62 with the primary purpose was to increase income: 73.2%, create an emergency Fund: 18.3% cover medical costs: 6% or fund a pending home project: 3%.
"There is no doubt that this is good for some who have no mortgage - which must be paid off before any money can begin to be dispersed.
"With your back against the wall because you have made bad financial decisions does not justify making yet another potentially harmful one. Taxes, insurance and upkeep do not go away either. What happens when HUD determines the home has not been kept up to their standards. How often will these appraisals be done?
"The sub-prime mess would never had happened had lenders offered detailed counseling to borrowers who could ill-afford a home in the first place. Disclosure was done then to uneducated first time buyers and, as many of us have found, did no good. Lenders are not the type to suddenly become beneficent just because grandma needs a few extra dollars to get by. There is money to be made with those gray hairs and they know it.
"Those blanket statements are generalizations and I hesitate to suggest, may also be predictive. Can you say, in all honesty, that reverse mortgages are the best option or is there some other less capitalistic method of helping seniors?"
Although the industry closely guards who applies for these types of loans/liens, the vast majority who consider reverse mortgages want to keep their homes, spending their last days in-place. But, and yes, here comes another blanket statement, they come with mortgages they should not have in the first place.
If the industry was truly focused on keeping these seniors where they want to be, wouldn't so many fees be unwarranted? You secure the property. You charge them interest. You use the actuarial tables to predict their expected life.
My problem you see is not with the borrowers, it is with the lenders.
According to the article, this 75 year old man and his wife had purchased the home in 1988 for $55,000 and refinanced it in 2006 with an adjustable rate mortgage that, like many of these sad tales tell, raised the payment to untenable levels. They missed a couple of payments as a result.
Now what does this have to do with reverse mortgages? And, who lends to a 75 year old man?
Yesterday, in response to an entry about reverse mortgages, Cory Matelli a reverse mortgage specialist took me to task. His comments basically focused on my lack of facts and figures and politely asking me to not make blanket statements about an industry that is his livelihood.
He wrote the following, with my comments at the end.
"Thank you for your article. While I don't agree with entire presentation quoted in the article you featured in your post, I also take exception to some of what you wrote, as well.
"You make a blanket statement that people don't use the proceeds from their reverse mortgage for maintenance or home improvement. How do you know this? Each borrower and their needs are different. There is no way you can make such a statement without knowing the individual borrower.
"You make another blanket statement that equity "should not be used" for day-to-day living expenses. I would agree with you if you're talking about someone in their 30s, 40s or even 50s, but when you're talking about retired seniors in their 60s on up, it very well may be the perfect avenue to help them with those very things.
"In most cases, seniors have lived in their homes for decades and have built an enormous amount of equity. Today, the senior homeowners throughout the United States combine for over 2 trillion dollars in home equity. When a senior has chosen to age in place, meaning they desire and intend to live the rest of their lives in their home, the infusion of cash generated by a reverse mortgage can be the very ticket to financial independence.
"It's easy for people to press the panic button and compare something they don't understand to something which is notably troubled, such as the sub-prime mess. For a variety of factual reasons, there is no comparison.
"None.
"You make an issue about reverse mortgages not "advertising" interest rates and fees. I don't know about your marketing knowledge, but most effective advertising you see plays up the positive aspects of a product. I've never seen a conventional mortgage advertisement that broke down the fees, either. The fact is, current interest rates can be found under 5%. Fees by the lender are comparable to conventional mortgages. The key is that HUD charges 2% for mortgage insurance which can double the up front cost. All of these details are disclosed and given to prospective borrowers.
"Ok, I've gone quite long in my reply. In closing, I want to say that I can see you are interested in the best interest of seniors, as am I. I have seen, first hand, the incredible positive impact seniors have enjoyed in obtaining a reverse mortgage. 93% of seniors surveyed by AARP indicated that their reverse mortgage had a positive affect on their lives.
"Just be careful when making blanket statements. As with all loans, reverse mortgages are not for everyone. But for whom they are appropriate, they are a godsend.
"Have a great day."
Thank you Mr. Matelli but that is not what I was questioning. So I replied, "True, each borrower is different. But you do not offer any statistics on who gets these types of loans or how they can attain financial freedom! Living in place has a warm and fuzzy tone but the truth is, no lender will give you what you think you deserve.
"Consider the following calculations done using my zip code on a $400,000 with no mortgage and no liens. The most available as cash is $171,280 through FHA and $62,289 from Fannie Mae. Monthly payments amount to $887 and $510 respectively.
"True, no other lender advertises the closing costs but neither do reverse mortgage lenders talk about the MIP (Mortgage Insurance Premium) at 2% (of the appraised value of the home - not the loan) or 0.5% limit on the premium. Some of the upfront fees have totaled $14,000 or more. Banks charge upfront fees of 2% or more on the home's value (in addition to HUD) and levy annual servicing fees. Nowhere have I seen a 5% rate as you suggested.
"Even though I used a $400k figure, this exceeds the limits currently available (FHA loan limit varies from $200,160 for rural areas to $362,790 for high-cost areas).
"You say there are a variety of factual reasons why this does not compare to the sub-prime mess that I suggest this could become but you offer no facts. Each year, the amount of reverse mortgages has climbed with the latest figures available showing more than 85,639 homeowners taking advantage of these types of loans in 2006. That's nearly double the amount from the previous year. That is due to aggressive promotions done by an industry fixated on making money.
"The average age of those seeking reverse mortgages is 73.62 with the primary purpose was to increase income: 73.2%, create an emergency Fund: 18.3% cover medical costs: 6% or fund a pending home project: 3%.
"There is no doubt that this is good for some who have no mortgage - which must be paid off before any money can begin to be dispersed.
"With your back against the wall because you have made bad financial decisions does not justify making yet another potentially harmful one. Taxes, insurance and upkeep do not go away either. What happens when HUD determines the home has not been kept up to their standards. How often will these appraisals be done?
"The sub-prime mess would never had happened had lenders offered detailed counseling to borrowers who could ill-afford a home in the first place. Disclosure was done then to uneducated first time buyers and, as many of us have found, did no good. Lenders are not the type to suddenly become beneficent just because grandma needs a few extra dollars to get by. There is money to be made with those gray hairs and they know it.
"Those blanket statements are generalizations and I hesitate to suggest, may also be predictive. Can you say, in all honesty, that reverse mortgages are the best option or is there some other less capitalistic method of helping seniors?"
Although the industry closely guards who applies for these types of loans/liens, the vast majority who consider reverse mortgages want to keep their homes, spending their last days in-place. But, and yes, here comes another blanket statement, they come with mortgages they should not have in the first place.
If the industry was truly focused on keeping these seniors where they want to be, wouldn't so many fees be unwarranted? You secure the property. You charge them interest. You use the actuarial tables to predict their expected life.
My problem you see is not with the borrowers, it is with the lenders.
Tuesday, March 25, 2008
Retirement Planning and the False Hope of Reverse Mortgages
The post I stumbled upon suggesting that seniors - because they are the only ones eligible for such a program look at the possibility of reverse mortgages as part of their retirement income went something like this:
(My comments follow)
"Life after retirement is never easy, especially if you are facing a financial crunch. It is a very well known fact that after retirement the monthly flow of income stops and this can have ad5ACverse impact on the life of the senior citizen. It goes without saying that money plays a very important part in the life of an individual and no matter whether you are retired or working you need to have a constant flow of money to take care of all your needs. Reverse mortgage is something which can help out the senior citizens who are looking for a constant flow of money even after retirement. It becomes very difficult for an individual to lead a life of dignity and honor if there is lack of money and this can set this just right for you. Reverse mortgage is something that citizens residing in and around California can use for their benefit.
"To be eligible to get money through this, the person must be the owner of a house. "The California reverse mortgage loan is available to any senior citizen above the age of 62 years who owns a house on the equity of the house. The person who takes the reverse mortgage loan will not have to repay the loan amount till the time he decides to sell the house, move out of the house or the borrower passes away. One of the main advantages of this is that this will never be passed on to the heirs if and when that person who takes the loan passes away. The loan amount will be automatically paid off as the person who provides the reverse mortgage loan will become the owner of the house after the house owner passes away. The loan amount will vary based on the equity of the home.
"To be eligible for any reverse mortgage loan in California a person must fulfill certain eligibility criteria. First the person must be a senior citizen, which means that he must be more than 62 years of age. The other primary requirement to get a reverse mortgage loan is that the loan seeker must in possession of a home. Therefore, if you want to take a loan from a broker, you must make sure that you know about the various things that are associated with taking the loan amount. Since you want to take a loan, it will be best for you to be informed about these aspects, so that you do not fall prey to any fraud loan brokers.
"Life is full of both pleasant and unpleasant surprises and that is why we need to be prepared to deal with any eventualities at any time. Taking a California reverse mortgage loan is one way to deal with the financial aspect of any emergence that you may face in your life and especially if you are retired you need the money form this loan to take care of all your day to day needs. You can take the loan money either in lump sum amount or in monthly installments based on your needs.
"Antonio Redford is a legal expert. He gives advice to clients who are looking for expert counsel on reverse mortgage. For more queries about reverse mortgages loan, American reverse mortgage, California reverse mortgage and California reverse mortgage visit www.reverse-mortgage-seniors.com"
Which is all fine and good with the following exceptions.
I wrote in reply to this "I am increasingly worried that this will be the new sub-prime. I see folks reaching for cash from their equity that has been appraised much lower than market value because the home is technically not saleable. The current resident, if they are considering a reverse mortgage just to stay in the house, is not going to use the money for maintenance or improvements but for day-to-day living expenses, which is not what equity should be used for. Lenders will use actuarial tables to determine the worth of the home against the length of life left in the borrower.
"Once the borrower hits the “dire straights” that forces them to consider this option, they often forget that they are indeed entering a loan, that the fees and interest rate are never advertised and are often not competitive with home refinancing or even second mortgages and that the contract will impact what they may have wished to do with the home in the future. The word “lien” is often played down.
"Reverse mortgages are an option of last resort and should only be entered into with legal, financial, and tax counsel and, if at all possible, the help of the homeowner’s family."
(My comments follow)
"Life after retirement is never easy, especially if you are facing a financial crunch. It is a very well known fact that after retirement the monthly flow of income stops and this can have ad5ACverse impact on the life of the senior citizen. It goes without saying that money plays a very important part in the life of an individual and no matter whether you are retired or working you need to have a constant flow of money to take care of all your needs. Reverse mortgage is something which can help out the senior citizens who are looking for a constant flow of money even after retirement. It becomes very difficult for an individual to lead a life of dignity and honor if there is lack of money and this can set this just right for you. Reverse mortgage is something that citizens residing in and around California can use for their benefit.
"To be eligible to get money through this, the person must be the owner of a house. "The California reverse mortgage loan is available to any senior citizen above the age of 62 years who owns a house on the equity of the house. The person who takes the reverse mortgage loan will not have to repay the loan amount till the time he decides to sell the house, move out of the house or the borrower passes away. One of the main advantages of this is that this will never be passed on to the heirs if and when that person who takes the loan passes away. The loan amount will be automatically paid off as the person who provides the reverse mortgage loan will become the owner of the house after the house owner passes away. The loan amount will vary based on the equity of the home.
"To be eligible for any reverse mortgage loan in California a person must fulfill certain eligibility criteria. First the person must be a senior citizen, which means that he must be more than 62 years of age. The other primary requirement to get a reverse mortgage loan is that the loan seeker must in possession of a home. Therefore, if you want to take a loan from a broker, you must make sure that you know about the various things that are associated with taking the loan amount. Since you want to take a loan, it will be best for you to be informed about these aspects, so that you do not fall prey to any fraud loan brokers.
"Life is full of both pleasant and unpleasant surprises and that is why we need to be prepared to deal with any eventualities at any time. Taking a California reverse mortgage loan is one way to deal with the financial aspect of any emergence that you may face in your life and especially if you are retired you need the money form this loan to take care of all your day to day needs. You can take the loan money either in lump sum amount or in monthly installments based on your needs.
"Antonio Redford is a legal expert. He gives advice to clients who are looking for expert counsel on reverse mortgage. For more queries about reverse mortgages loan, American reverse mortgage, California reverse mortgage and California reverse mortgage visit www.reverse-mortgage-seniors.com"
Which is all fine and good with the following exceptions.
I wrote in reply to this "I am increasingly worried that this will be the new sub-prime. I see folks reaching for cash from their equity that has been appraised much lower than market value because the home is technically not saleable. The current resident, if they are considering a reverse mortgage just to stay in the house, is not going to use the money for maintenance or improvements but for day-to-day living expenses, which is not what equity should be used for. Lenders will use actuarial tables to determine the worth of the home against the length of life left in the borrower.
"Once the borrower hits the “dire straights” that forces them to consider this option, they often forget that they are indeed entering a loan, that the fees and interest rate are never advertised and are often not competitive with home refinancing or even second mortgages and that the contract will impact what they may have wished to do with the home in the future. The word “lien” is often played down.
"Reverse mortgages are an option of last resort and should only be entered into with legal, financial, and tax counsel and, if at all possible, the help of the homeowner’s family."
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