Reverse Mortgages Simple as the Ads Portray? Not By a Long Shot!
Despite the many TV ads touting the virtues of reverse mortgages, what they fail to say is that, although this is sometimes a reasonably simple process, often it can be extremely complex with banks stringing people along for many months before reaching a decision, even electing to ignore appraisals.
This is part of a multi-part investigative series reporting on my actual experiences in attempting to obtain a reverse mortgage on my home.
Briefly, I first attempted to locate someone who would deal with me almost exclusively online for several reasons.
First, I am disabled and a disabilities rights activist and author so it is much easier for me to work with companies and individuals online.
Second, this method guaranteed that I would have a step-by-step record of every part of the process.
A reverse mortgage is a government guaranteed program which pays older/retired home owners (with or without mortgages) for their home.
The critical difference between this and simply selling the home is that you KEEP ownership.
The amount available to pay off any existing mortgage and/or as a cash payout depends only on two factors - the age of the youngest owner of record, and the appraised value of the home.
Credit ratings, employment, income, or available assets do not factor in except if the owner is in arrears on some house or homeowner's tax payment.
Online calculators such as the one from the AARP give precise numbers and that site in particular gives plenty of general information about reverse mortgages. As a quick guide, someone about 65 years old would get about half the appraised value of their home after various expenses.
The older you are, the higher the percentage of the appraised value.
That money would first be used to pay off any existing mortgage and or second mortgage. Any remaining amount can be taken in periodic payments or a lump sum.
The home owner could still sell the property and pay off the reverse mortgage amount plus any interest, or continue to live in the home being responsible only for upkeep, utilities, insurance, and taxes.
Sounds simple and it is government guaranteed for the bank so you'd think this would be easy with banks anxious to make this easy for older home owners, but it can be very time-consuming and complex as I will write about in future issues.
After 9 months I am now trying to work with the third lender (a popular insurance/bank company with lots of very "doggie" and friendly ads on TV touting their RM product). They are currently refusing to communicate details online).
A bit surprisingly, that's not unusual; few RM lenders are willing to put everything in writing along the way despite the fact that this is all closely regulated by the federal government.
Look for future parts of this series either by searching at Newsblaze.com or going directly to my Newsblaze home page:
John McCormick is a reporter, /science/medical columnist and finance and social commentator, with 17,000+ bylined stories. Contact John through NewsBlaze.
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