Reverse mortgage lender fees

reverse mortgageA reverse mortgage is a type of loan that enables older borrowers to convert their home equity into cash, often serving as a source of supplemental income for retired homeowners.

Unlike all other mortgages, in which borrowers pay their lenders, reverse mortgages flip the money flow: They pay the borrower, either in the form of a credit line, monthly payments or a combination of the two.

The loan debt gets paid off with the proceeds of the sale of the home -- either when a borrower moves out or passes away.

"You're leveraging the remaining equity in your home, " said Jeff Corbett, a former mortgage broker and current consultant in the mortgage and real estate technology industries. He said the most "practical, prudent" reverse mortgage is probably one that pays you in monthly payments, rather than in a lump sum.

Different Loan Options

Home Equity Conversion Mortgages, which are insured by the Federal Housing Administration, are the most common form of reverse mortgages. To be eligible for an HECM, which may have a fixed or variable interest rate, you must be 62, own your home outright (or, in some cases, have a low primary mortgage balance) and live in your home full-time.A Reverse Mortgage surance premiums over the course of the loan, or otherwise face the possibility of foreclosure. HECMs may not exceed $625, 500.

There are also single-purpose reverse mortgages, which are offered by state, local and non-profit organizations. These mortgages may only be used for one purpose, such as home renovations or property taxes. Usually, only low- or moderate-income borrowers qualify for them.

Proprietary reverse mortgages are a last option, which may have higher interest rates and upfront costs but have no income or medical requirements. These mortgages have all but vanished in the wake of the housing crisis.

The maximum loan amount a borrower may receive from a reverse mortgage is determined by the length of the loan, the loan's interest rate and the anticipated appreciation of the home's value over the course of the loan. This is in order to maximize the chances that the home's eventual sale will be enough to pay the accumulated debt.

Back-up plan: reverse mortgages can help folks afford retirement, but are they a good offering for insurers with banks?(Life: Reverse Mortgages)(Statistical table): An article from: Best's Review
Book (A.M. Best Company, Inc.)

3 to 5 year minimum

2009-01-31 11:30:30 by RM_Guy

If you are considering a reverse mortgage, plan on staying in the home for at least 3 to 5 years. I do not advise a shorter time period. The longer you have a reverse mortgage the less expensive the closing costs become. This is because you spread the costs over a greater number of years, thus lowering the annual costs.
In this respect they are similar to a "forward" mortgage. You would not get a 30 year forward mortgage if you knew you were leaving the home in 2 years, too expensive.
There are no "points" in a reverse mortgage. HUD does not allow such deception in reverse mortgages

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