BluefoxToday blog : Reverse mortgages making a splash

Reverse mortgages making a splash

This financial product has been around for a while, since 1989 to be exact, but its impact on the home loan scene has really been minimal. So far at least. One reason seems to be the lack of public awareness, meaning the marketing side has been lackluster. The other thing is that those who know that it's there are uncertain how it works and even have some reservations about its benefits. So, let's go over some of the more important features right now.

The starting point is that it's for seniors who are 62 or older.

  • The title stays with the homeowner.
  • There can be an existing mortgage on the home.
  • The money is tax-free.
  • The money is paid out either in a lump sum, monthly payments, line of credit or a combination of these three.
  • The money can be spent on anything; home renovations, medical bills, pay off credit cards, travel etc.
  • There are no income or credit qualifications.
  • Homeowner remains responsible for taxes and hazard insurance.
  • Closing costs are similar to the ones with a purchase mortgage.
  • Typically costs can be financed with the reverse mortgage.

One concern among seniors is that they could at some point owe more than what the home is worth. It can not happen. Reverse mortgage is a so-called non-recourse loan, meaning that the lender is prohibited from going after anyone or an estate for repayment.

A reverse mortgage makes sense if you plan on staying in your current home, say, more than three years. Home equity loan would be better if you intend to move out sooner than that. Also, many seniors have a lot of equity that just sits there and if they worry about making ends meet, tapping into the equity could be the solution. It would preserve your financial security.

Knowledgeable users of the program enjoy drawing down the accumulated equity while continuing to live in their homes and best of all, there are no monthly payments to tangle with.

Since the product was introduced in 1989, about 300,000 of them have been taken out. By one estimate there will be around 16 million by the year 2010. That's a big leap.







Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 2 commentsEsko Kiuru • September 25 2007 05:18PM


I recently made inquiries regarding the closings costs associated with getting a reverse mortgage. This information is not available online. After talking to a mortgage broker, this is what I learned about closing costs.

2% to FHA

2% to Mortgage Company

2% costs usually incured doing closing with the local governmental agencies.

 In my mind, paying more than $21,000 in closing costs is rather a steep price to pay.

Posted by Ronald Curtis, Negotiating the best price and terms for my Buyers (Manes Realty Group) over 12 years ago


I'm unfamiliar with your situation, but closing costs do vary.

Posted by Esko Kiuru over 12 years ago