The reverse mortgage program has been around since 1961 and since that time, there have been a variety of changes made to the program. Some of these changes include the requirement for 3rd party counseling before the loan can be obtained, the regulation of fees charged by lenders, benefits and safeguards for spouses on the loan that are under 62, and financial qualifications.
So why are we talking about change? In June of 2019, USA Today released a news article about the reverse mortgage program that reported on only part of the story. The author of the article made claims such as the high cost of doing a reverse mortgage, the high-interest rates they command, and the myth that a reverse mortgage is not a long-term solution. To reassure consumers who are considering a reverse mortgage, it is important to know the whole truth as well as the differences between the loan 10 years ago and the new reverse mortgage insured by the FHA that is offered today.
The cost of doing a reverse mortgage should not be looked at independently but rather weighing out the long-term benefits. Two parts of the cost of doing a reverse mortgage are the mortgage insurance and the financing fees. Both are federally regulated and are like traditional FHA financing. Of course, because they are different loan products, the calculations will be different.
The interest rates on reverse mortgages vary depending on each specific loan, however, they are very competitive and are in line with other traditional 30-year mortgages. As an example, in December of 2018, a 30-year fixed mortgage had an average interest rate of 4.58 percent and reverse mortgages were 4.67 percent.
The benefits of doing a reverse mortgage will be specific to each individual situation; to say that they are not a long-term solution would not be an accurate statement for everyone considering a reverse mortgage. The possibility of not having principle and interest payments may provide the borrower a way to live on their current income. Allowing borrowers an option to not have to use all their cash to buy a house to avoid having a mortgage payment can change the landscape of their retirement plans. The wants and needs of each consumer will determine the benefits of doing a reverse mortgage.
Credit and income qualifications apply. This is an important change that went into effect in 2015 and was implemented to protect consumers from not having the funds to pay for their taxes, insurance, HOA, and maintaining the property. It is in place so lenders can make credit and income decisions as they do in every mortgage decision.
What hasn’t changed about the reverse mortgage are the responsibilities of the homeowners.
Taxes and Homeowners Insurance still must be paid by the borrower
Homeowners association dues and any other fees associated with the home must be paid by the borrower
The home must be maintained
The reverse mortgage industry continues to be diligent in educating consumers about the loan and how it offers a viable financial option either in the planning stages of retirement, well into retirement as a means of living a better life, or looking at it to buy their retirement dream home.
Don’t wait to find out how a reverse mortgage can change your life.
Don’t wait to find out how a reverse mortgage can change your life and bring you peace of mind. I am a local loan originator dedicated to helping people just like you. I can be reached for a free consultation at 480-209-9524 or by email at firstname.lastname@example.org. Retire Like You Mean It!Back to Top
September 07, 2019
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