What exactly is reverse mortgage, will I lose my home?

Answer 1

You will not lose your home, but here are the disadvnatages. Overall, a reverse mortgage is the perfect solution...if it fits your situation. You may learn more at http://www.reversemortgagepage.com.

If you are going to get a reverse mortgage, you first must know, and be comfortable with, the disadvantages of a reverse mortgage. With a traditional mortgage the borrower pays down the debt over a set term, usually 30 years. Conversely, with a reverse mortgage, the borrower builds up debt while they live in the home.

In addition to building up debt, there can be significant up front costs when brokering a reverse mortgage. If you plan on only taking out a small portion of money or plan on living in your home for only a short time then these costs can push the effective rate on the home up considerably.

The last significant disadvantage of a reverse mortgage is that you leave your heirs with a noticeably smaller legacy. It might be something you should discuss with your heirs. When you take out a reverse mortgage, you will have less equity in the home and likewise, the heirs will inherit a smaller portion of the home’s value. Also, the longer you live in the home, the more the interest builds up, which further lessens the equity you have in the home.

What are my current financial needs?

Everyone, no matter the age, needs to assess their budget and the best ways to effectively manage their financial needs. The easiest way to do so is by going through last month’s (or any average month’s) bills. You should include everything you regularly spend money on. Where are the bulk of your expenses? Do you need to adjust your budget?

CAN I adjust my budget?

This will vary from person to person and household to household. There are many ways to cut down your expenses such as different grocery stores, paring down unused or unnecessary things, going out to eat, having premium cable, club memberships, etc… If you are unwilling to sacrifice some of those things that you’ve become accustomed to, how much more money will you need?

It would be wise to consider for how long the equity in your home can satisfy your budget.

Am I willing to move?

Importantly, there are other options for increasing cash flow other than a reverse mortgage. Moving is the most common of those options. It can be very hard to think of leaving the home you worked so hard for or raised your children in, but sometimes moving is inevitable. With the proceeds, you can decide to rent a home or purchase a smaller home. Maybe a condo or townhouse is appropriate. Many seniors need to evaluate whether their current home is a suitable living environment. Getting around can be difficult as you age and a large home may not be the right choice for you. Selling your home is an excellent option if assisted living is a near-term possibility.

No matter what the decision is, those interested in reverse mortgages need to gage their current home situation and decide whether moving is a better option for them.

What do I plan to gain from a Reverse Mortgage and is this realistic?

This is an important question to ask yourself. You need to find your own motives for wanting a significant influx of cash. There are significant advantages and disadvantages of reverse mortgages. You have probably already decided how you would want to spend the money, whether it’s to pay bills, meet monthly expenses, or remodel the kitchen, but it is very important to realize the interest you will be accruing. When you ask yourself this question, you should find your true motives and whether other options should be examined.

Answer 2

YOU WILL NOT LOSE YOUR HOME. EVER.

Now that we got that out of the way, a reverse mortgage lets you tap the equity in your home without having to make any payments out of pocket, ever.

In general, you can take a lump sum, set up monthly payments, or have a line of credit you can access at any time. Or some combination of these options.

IF there is any equity in the home after you die, your heirs get it. IF you live so long that they've paid out more money than the home is worth, your heirs get nothing, but the debt dies with you, so your remaining estate would not be affected.

Looking at the AARP website is a great place to start to get basic information. Right now, there's only 2 main companies offering this product, Financial Freedom (a subsidiary of Indy Mac Bank), and Wells Fargo, but lots of brokers can do these for you as well. Your rates and offers will be the same anywhere you go, pretty much, since they're all the same exact product.

There's no risk in inquiring about them. You have to get an initial consultation, get your offers, and THEN meet with someone certified in reverse mortgage counseling. Only after meeting with the counselor and having all your questions answered to your satisfaction, will you even be allowed to proceed with the loan. The government made some massive changes to protect seniors after some bad reverse products got in the marketplace in the 80's, so this is all for your benefit.

You do have to live in the home for this to work, and if you move to a nursing home, the loan would be called due (one year not living in the home triggers the loan to be due). So it's not for everybody, but there's some major benefits for the right person.

Answer 3

You will not lose your home unless you chose to.

A reverse mortgage is to help seniors who are house rich but cash poor. You can't use your house to buy medicine even with Medicare Part D.

So the bank either lends you a lump sum to pay for things such as taxes, repairs, or bills. The money is then accuring interest because you're not paying the house off. When you die the house is sold to pay off the loan and the rest is given to your heirs. As long as you live in the house the bank cannot force you to pay back to the loan. See the difference between this and a regular mortgage.

If you move, stop living in the house, or sell the loan becomes due.

It's a good way to get extra income for elderly people and it's not a scam.

Answer 4

Several answers ahead of mine are quite good and a few of them are flawed. Thats precisely the problem in todays lending world. Some loans make sense to some situations only. The consumer goes by the advice of a greedy or uninformed lender and they get a "bad for them" loan. Reverse mortgages are just the sort of loan that fits all the above. You can go to AARP's website and find some great info as another responder has already stated. There are a few types of reverse mtgs and several varieties of payouts from them, and therein lies the confusion. I would suggest the FHA type, as for payout there are 3 categories, A - you can get a monthly draw from your total entitlement, B - a portional lump sum and draw from the remainder when needed, the unpaid balance can earn interest. or C - all at once. The amount of the entitlement is determined by the value of the property less existing liens, then if necessary capped at FHA area loan limits. Your loan repayment back to the lender is triggered by title transfer or death. The estate in some cases can, within a short period, repay the loan including imputed interest and sell the property to gain the remaining equity for the estate in probate.

Answer 5

There are many different forms of "Reverse-Mortgages."

Depending on the plan you choose you may lose the home upon death or you might not. The theory behind the product is that if you are retired and have a LOT of equity in your home, you can gradually borrow from your own home to provide you with an income.

Usually, this is not a wise financial decision. If you can't afford your lifestyle in retirement, think about selling your home and living in a smaller, less expensive property. Then take the equity in your home and consult a financial advisor about the best way to create an income.

Answer 6

Like pay option ARMs (negative amortization loans), they are great for certain people. But they're not for everyone. Reverse mortgages are exactly that, you get money out of the equity in your home instead of putting money in. This is great if a retired person has lots of equity in the house but has limited retirement savings nor other family/resources to support their livelihood. You can live in the house for the remainder of your life but the amount the banks/lenders pay you will depend on your age and life expentancy (they have actuaries to calculate those numbers, just like insurance/annutiy companies)

Answer 7

I know a couple of seniors that got the reverse mortgage and he passed away a year ago and she is still living there. So I don't think you lose your home but your children will get nothing from the home once you pass away, it reverts to the lender.

Answer 8

LoL. the new scam on old people. You will only lose it if you live too long. The idea is to use the equity in your house to afford the rest of your life. When you die, they get the house. Or ofcourse if you live too long. In which case you should be about ready for a nursing home anyways. Its not a bad idea but you should wait until a few people get in the market. Right now there is only one major company offering this so the rates are ridiculous. In a few m,onths there will be an influx of brokers doing this and you will get a lot more out of the deal.

Answer 9

You borrow the value of your home and it is paid to you monthly over a period of years set forth in the contract. Even if the period ends you are allowed to live in the house (without the monthly payments to you) until you die. You won't lose the house as long as you are alive, but you can't will it to anybody. The bank gets it.

Answer 10

You borrow the value of your home and it is paid to you over a period of years. Even if the period ends you are allowed to live in the house until you die and then the lender gets it.