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It is said, that the reverse mortgages are more expensive than the usual mortgages and that is true, because the reverse mortgages are special products. But when a senior thinks about the costs, he has to think, what are the benefits he can get. The target of the reverse mortgages is to offer financial aid to a senior, who is cash poor but equity rich. Usually these people have met sudden cost increases, like the higher medical bills and they have no other source of additional money than the equity of the homes. 1. The Reverse Mortgages Have No Monthly Payments. The reverse mortgages work in the way, that they add the amount of disposable cash monthly money. If a senior has a traditional mortgage left, he will pay that away with the reverse loan. The benefit is that this gives him more disposable money every month. The borrower can order, how the lender will pay to him. The need of the money will dictate the schedule. For instance, if the target is the home repair, then maybe the lump sum is the wisest one. The alternatives are the monthly payment, lump sum, credit score or the combination of these. 2. The Decision About The Interest Rate Is Important. The reverse mortgages are always long term commitments and this is why the interest rate has a key role in the decision making. During the loan running time they can change many times. The alternatives are the fixed rate or the variable one. The discussion with the counselor can give a lot of information for this. 3. The Compulsory Insurance. When a senior takes the reverse loan, he has to take also the mortgage insurance, which is compulsory. The loan capital and all the costs will be paid back, when the loan will be closed and the home will be sold. This happens, when the borrower will move away, sell the home or die. If the selling price will not cover the cost package, the insurance will pay the difference. 4. Who Can Guide You? There is a counselor network of independent federal counselors and the counselor meeting is compulsory. The counselors are not in the service of any lender, but are independent. This means that they can guide a senior about all options, not only about the reverse loans. 5. Is The Reverse Loan Worth To Take? I would say, that the reverse mortgage is a serious product and that means that the usage of the money must be a serious one too. It is understandable that it is not so easy to start to use the equity of the home, which a senior has paid for decades, but if that is the only solution, it is fair. 6. The Typical Costs Of The Reverse Loan. The compulsory mortgage insurance is 2 % of the appraised value, the origination fee, the cap is 2 % of the first $ 200.000 and after that 1 %, with overall cap of $ 6000, the title insurance, the title, county recording and attorney fees, the real estate appraisal $ 300 - $ 500, the survey ( in some cases ): $ 300-$ 500 and the monthly service fee, from $ 25 to $ 35. Juhani Tontti, B.Sc., Marketing. The costs of the reverse mortgage are higher than those of the usual mortgage, but the reverse loan offers unique benefits. Visit: reverse mortgages
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