Have been looking to purchase a home built in 2007 and looking for ways to make this a done deal and today my agent told me about something called "reverse mortgage for purchase of a home" As I seem to understand it at my age,63 the lender will do a reverse loan where I put down 40% of the homes purchase price ($415,000) and can live there till I die,only cost to me are upkeep,taxes and insurance. So for $166,000 down payment I get to live in a $400,000 home,so does anyone know of any downsides to this.I don't have any kids no relatives I want or need to leave an Estate to.I can see putting money that would have gone into a mortgage payment go into a trust fund for my god daughters two kids for College. I was or am planning on putting down 20% and my payments before taxes and insurance were to be app $1,45.00 I should add that the lender cover all closing cost.I've never heard of this form of a reverse mortgage so is it something new? Gary
No, it has been around for a while. I would give you info on it, but i am sure there are more educated folks than I on this subject
Buy a house for 166k instead... Or do what I did, buy a house for $150k, rent it for $1400/mo and use that to pay your own rent. You can still sell the house if you ever want to and you have steady income to pay your rent. Plus the house should appreciate over time as well.
really NOT a good deal. Reverse mortgages, or Home Equity Conversion Mortgages (HECM), are available to homeowners who are at least 62 years old. The loan taps your home’s equity, and the bank gives you the money either as a lump sum, a line of credit, or a monthly draw. You still pay for property taxes, insurance and the costs of maintaining the home. The lender can foreclose if you don’t. Also, because interest accrues over the life of the loan, your debt can ultimately exceed the value of your home. You don’t make monthly payments, but if you sell the house or move out for more than a year, the loan is due and the income stops. If the house is sold upon your death, proceeds go to pay the loan. Fees on a reverse mortgage are expensive and can cost you 10% or more of the loan amount. You’ll pay: An origination fee Standard closing costs Mortgage insurance premiums for coverage to make up the difference if your home doesn’t sell for enough to pay the loan A monthly mortgage insurance servicing fee Fees for mandatory credit counseling, which you pay whether or not you get the reverse mortgage Interest rates on a reverse mortgage are adjustable unless you take your money in a lump sum. You are also required to take a loan for the maximum amount you qualify for. All kindsa screwy stuff... If you have some cash saved up, you're better off just getting a regular mortgage. check this out http://www.daveramsey.com/radio/highlights/?urlVars=2011/10/18/What-Is-A-Reverse-Mortgage
no kids , no relatives, 63 ? sure you can but I don't understand why? there is a big difference between what you need and what you want though. the taxes and maintainience would turn me off right there. I'd lean more on getting a nice motorhome and becomeing a gereatric gypsy . but that's just me. bill and darethea
Reverse Mortgages have their place, but the deal you are describing doesn't sound like one likely to have good outcomes. I don't think the deal you describe is a good one. I'd stay away from it.
I have never heard of a reverse mortgage and can't offer any advice about if it is good or not. But i would just like to point out something to the people that are saying "just buy a $166k house". There is a big difference between a $166k house and a $400+k house. Maybe he doesnt want to live in a $166k house. In some places in the US, $166k won't get you much. Maybe he doesnt want to spend the last 30-ish years of his life in a substandard home. I can't blame him. Not saying a reverse mortgage is wise, because i know fuckall about them. I am just saying i cant blame him for wanting to finish his life in a $400k+ house vs a $166k house.
I also agree with that too. To be honest, i wouldnt dump that much cash into something. It sounds cheesy, but we are "never guaranteed tomorrow". Personally, I would spend $125k on a nice motorhome and then just tour the country, staying where i wanted to (that is how my great uncle retired). Of course, it all depends on how much bank you are working with. I mean, if you are sitting there with a couple million in the bank and just dont feel like messing with a house payment, then fuck it, go for it. Give em the $166k, get the house you want and go on. But say if I had like $400k (for example), i wouldnt dump $166k of it on the house up front. I would do a regular mortgage, put like 10% down on a house, put enough in savings to cover the house note for a long time......then have money to "play" with.
Reverse mortgage isn't going to work for buying a new house. Basically they're kind of dumb, you're just getting another mortgage using the house you already own as collateral just like a normal one. Hell, they're even paying off the previous home owner - you.
I may not do this reverse to buy option,this house is available for $415,000.I could put up $166,000,the mortgage company puts up $249,000 and I get to live there till I'm dead.Sounds good enough but I'd prefer having more control over the house and its value over time. I wouldn't call this option an reverse mortgage if I was running things but these people are.I would provide an link but not sure if I can stay out of Mongo's hell hole if I did. I'm really looking at a regular loan with 20% down to avoid the mortgage insurance and since I have never heard about this type of reverse mortgage thought I'd ask.
You have to believe they are not offering you that type of deal because it is in YOUR best interests. Walk away.
It's allowed under H.R. 3221 signed into law on July 30,2008.I can't figure out how this benefits the lender which is why I'm looking for answers. Since it's a Government approved program that claims to helpful I should run the other way right?
Benefits the lender because they make money on the mortgage (points), and then they also make money on the reverse mortgage (fees, effective interest rate). Reverse mortgages are really for old people with small incomes but a lot of equity in their house that they have built up over time.
