What Are Reverse Mortgages?
A reverse mortgage allows home owners aged 62 or over to receive a lump sum, installments, or a line of credit by releasing equity that's built up in their principal residence. There are no monthly payments because the bank is repaid only when the home is sold or the last of the owners dies, so there is no income qualifying, and the state of your credit report is unlikely to bar you from borrowing (unless you are in an active bankruptcy) though it may affect the amount you receive.
Better yet, the New York Times suggests that you're pretty much guaranteed that you can stay in your home until you die, providing that you keep up with your property taxes and home insurance premiums.
So far so good. But nobody reaches the age of 62 without realizing that banks aren't charities, so where's the catch? Well, reverse mortgages can be an expensive way of borrowing. Interest and fees mount up, and you may find that your interest in the property has been whittled away when you come to sell or when your heirs come to inherit. However, you shouldn't ever owe more than the value of the home.
Current Mortgage Rates Make Programs More Attractive
If you choose to take a lump sum (but not if you opt for installments or a line of credit) you can choose a fixed interest rate. As we are currently enjoying virtually the best mortgage rates in 50 years, that means that you could be in as strong a position as someone buying or refinancing with a fixed-rate mortgage.
Reverse Mortgages--Take Care
In 2009, the FBI warned of: "...unscrupulous loan officers, mortgage companies, investors, loan counselors, appraisers, builders, developers, and real estate agents [who] are exploiting Home Equity Conversion Mortgages (HECMs)--also known as reverse mortgages--to defraud senior citizens."
Pulitzer Prize-winning journalist Saul Friedman suggested in his Gray Matters blog that the safest form of reverse mortgage is one backed by the Federal Housing Administration (FHA). He also pointed out that some of the biggest lenders have recently begun to waive origination and servicing fees on some reverse mortgage loans, boosting the amount borrowers receive by up to $10,000.
Best Mortgage Rates Receding?
Those who are in the market for any sort of home loan may be interested in a June 15, 2010 story in the Pittsburgh Business Times. This reports one survey that says that current mortgage rates are rising in some parts of the country, though in most areas they are remaining flat.
Could this be a sign that we've already seen the best mortgage rates? It's too soon to say, but if you're thinking of refinancing or buying a home, now may be the time to compare mortgage rates.