If you have been looking at obtaining a reverse mortgage, then you have certainly learned that one of the repeatedly cited drawbacks is that the prices are high. This seems to be a real argument on the surface. If however, you begin to dissect the costs of a reverse mortgage and compare those costs with alternatives such as selling and moving your house, you may find that the costs are high only if you have access to other assets or sources of income other than your home. In order to make ends meet or for other financial purposes, if you really need a reverse mortgage, then you can know that the costs are not too high considering your unique circumstances. -Read More Here.
Let’s take a closer look at what a reverse mortgage’s actual costs are and what these expenses pay for.
The FHA insured HECM (Home Equity Conversion Mortgage) has been the majority of reverse mortgage loans that have closed in the United States to date. Since these loans are insured by FHA and backed by HUD, they are known to be the safest available reverse mortgage loans and typically provide the most incentives and more options on how you can choose to obtain your loan proceeds.
The guarantees you earn with the HECM reverse mortgage loan insured by the FHA are:
- Under the tenure option, as long as you live in your house, you can continue to get your monthly payments from your reverse mortgage. That ensures you will continue to receive those payments before you permanently leave your home, even though you surpass your life expectancy and your house is not worth as much as your reverse mortgage has paid you. Garantied!
- By the time the loan is repaid, your descendants or the assets will NEVER owe more than the value of your home on the loan. Non-recourse loans are Reverse Mortgage loans. If there is a deficit at the point of repayment, the lender will never come back to your estate or your heirs.
- In addition, if the lender is out of business, the FHA insurance ensures that in compliance with the terms of the original loan agreement, you can continue to collect your monthly payments or have access to your credit line.
If there was no FHA mortgage insurance, you can be sure that very few lenders will be willing to make reverse mortgage loans with the attractive terms that are provided to seniors today.
2 percent of the loan amount is the equivalent of the FHA insurance premium. The insurance premium is bundled into the loan, along with other closing costs. They are not out of pocket costs upfront, they are actually charged at the time the loan is repaid by you or your assets.