Some big lenders have pulled out of the reverse mortgage business--Wells Fargo and Bank of American, but plenty of other lenders remain, so if you want one, you'll have no trouble finding a lender. Why? Because they are highly profitable for the lender, but perhaps not such a good deal for the borrower; they have steep up front fees.
Only get one if you:
- Have equity in your home and no way of paying your bills other than selling your home and living on the proceeds
- Can pay the property taxes and home owners insurance bills from now until you die with or without the money you're getting from the reverse mortgage.
With a reverse mortgage, only available to those 62 years young, you get to cash out most of your equity and keep your house. The bank pays you the value of your house either in a lump sum or fixed monthly payments both of which are based on formulae taking into account your home's current value, current interest rates and your age.
Since you don't pay back a reverse mortgage, you don't have to prove income--the reverse mortgage is your future income. If you take the lump sum and spend it, you get to stay until you die, but if you don't pay your property taxes the bank will and then they'll foreclose. If you don't pay your insurance, the bank will buy a policy for you and expect you to pay for it, but if you can't, the bank will seek permission from HUD to foreclose.
So before you sign up for a reverse mortgage, make sure you'll be able to pay your property taxes and insurance in the future and allow for inflation, as they always go up, not down. Here, along the South Carolina coast, expect substantial increase in windstorm and flood insurance.
A reverse mortgage can be a blessing if your retirement income isn't enough, just be sure you can always pay your taxes and insurance no matter what.
No comments:
Post a Comment