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CNN Airs Segement on Reverse Mortgages

CNN Aired a great story on Reverse Mortgages but there are multiple problems with this presentation: 1) Unless it is a fixed-rate reverse mortgage, it is a home equity line of credit; 2) The borrower does not need to own the home "free and clear.  Most of the borrowers that we work with have existing mortgages of varying amounts on their homes when they take out a reverse mortgage; 3) It is in no way “like an interest free loan.”

Posted on Friday, September 4, 2009 by Bill Smith

1 comment (Add your own)

1. Denna Neff wrote:
An additional look at the way a Senior Reverse Mortgage works IF the homebuyer decides to buy back the home later as I've been told one can do. Say you are 65 and have the $300,000 purchase price, Reverse Mortgage Proceeds $197,700, Cash required to close $102,300 (NOTE THIS DOES NOT INCLUDE CLOSING COSTS nor MOVING EXPENSES). The Reverse Mortgage proceeds is like a principal balance. Let's say your fixed interest rate is 5.6%. ALWAYS GET THE INTEREST RATE AND AN AMORTIZATION SCHEDULE. Now, you will not have to make any mortgage payments but still responsible for the house as though it's your own, property taxes, homeowners ins., upkeep and maintenance, termite, etc., etc.. In 10 years, at 75, you want to buy the home because it has escalated in value. This is NOW like one of those zero-interest, no payment, loans on furniture and electronics. You will owe back interest for 10 years or 120 MONTHS calculated on $197,700 each of those 120 months! Roughly speaking, without computing this with a calculator, the interest only in dollars could be close to $170,000 so you would have to buy the house back at $197,700 + $170,000 or $363,800. Be sure to get an amortization schedule to show what the buy-back will be at any point in time. You may not think you want to buy-back but you can, at least, be informed and more knowledgeable about making this type decision. If you do not buy back, it's okay if that is what you want, so you are then basically owning but renting back with no monthly payment. There are pros and cons to it as it's an individual need or preference.

September 29, 2009 @ 7:24 AM

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