Reverse Mortgages : Pros And Cons

By
Mortgage and Lending with Pinnacle Capital Mortgage Corporation NMLS 150049 AZ BK 910890

Despite several big-name banks pulling the product from their respective home loan offerings, reverse mortgages remain a popular mortgage choice among homeowners aged 62 or over.

A reverse mortgage is exactly what it sounds like — a mortgage in reverse. Rather than borrow a fixed amount of money then pay that loan balance down to zero as with a “forward” mortgage, a reverse mortgage starts at a given loan balance and works its way up as scheduled payments are added to the existing loan balance.

This 4-minute piece from NBC’s The Today Show highlights a few pros and cons of reverse mortgages, and the reasons why you may want to consider one, including :

  • No mortgage payments are ever due on your home
  • There is no credit check required for a reverse mortgage
  • There is no income requirement to qualify for a reverse mortgage

There are some basic qualification standards for the reverse mortgage program including a requirement that all borrowers on title must be 62 years of age or older; and that the subject property be a primary residence. Loan fees can also be higher than with a conventional-type mortgage.

If you meet the qualification standards, though, with a reverse mortgage, you have flexibility in how your home equity is distributed to you. You can receive a lump-sum payment, elect for monthly installments over time, create a line of credit, or a combination of all three. 

Like all mortgages, reverse mortgages are complex instruments. That’s one reason why all reverse mortgage borrowers are required to attend counseling — the government wants you to be certain that you understand the nuances of the reverse mortgage program.

Your lender will want you to understand the program, too.

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Posted by

Rod Dennis
Mortgage Loan Originator

NMLS# 150049,Licensed: AZ LO0915938, CA-DOC150049

WJ Bradley Mortgage Capital, LLC

Corporate NMLS
ID-81395
Arizona 
BK-0903998

 

 

| Phone:   480-850-6501
| Fax:       480-212-4976
| Mobile:  480-695-0733
| roddennis@roddennis.com

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Rainmaker
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Chris Smith
Re/Max Chay Realty Inc., Brokerage - New Tecumseth, ON
South Simcoe, Caledon, King, Orangeville Real Esta

Rod, how is this product accepted by the general public in your market?  In South Simcoe, there still is a reluctance among many candidates to try this option...

Jun 20, 2012 10:58 AM #1
Rainer
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Rod Dennis
Pinnacle Capital Mortgage Corporation - Scottsdale, AZ

Chris- Because of the age brackets that you must qualfy in, the market for this product is very small. I personally do not do a lot of reverse mortgage to talk with experience, however I have done a few and seem prudent for curtain situations. Reverse Mortgage are very hard to set up, but once they get set up they can prove helpful to the homeower, especially if they are retired with a lot of equity in their home. Although negative amorization is risky, there is a market for every product I believe. 

Jun 21, 2012 09:51 AM #2
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