Are reverse mortgages safe?

Sam · Last edited by Sam on Tue Sep 11, 2007 5:26 am

Reverse mortgages are quite safe, as

These allow you to remain as the owner of your property just as in any mortgage. Moreover, a borrower need not repay the loan in monthly installments.
The reverse mortgage is only paid off when the borrower dies, or when he sells the property or permanently vacates the property. Moreover, if the amount of the total debt is lesser than the property value, then the extra cash is handed over to the borrower.

But in case the entire amount exceeds the home value, then the lender cannot obtain the entire amount, rather he can claim only the amount that is equal to your home value. Hence, borrowers can never owe more than their property value. This overall cap imposed on a reverse mortgage is known as 'non-recourse' limit.

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Reverse Mortgage

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what is reverse mortgage and why it is good?

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Hi Arnold,

A reverse mortgage is a home loan that does not require to be repaid as long as a consumer occupies the property. As in the case of other mortgages it does not require monthly payments and enables to convert the home equity into cash.

Here, the interest rate is not really important to the people taking a reverse mortgage since they won't be paying off the loan. That's because a reverse mortgage, as its name implies, lets homeowners who are aged 62 or older take equity out of their houses without having to sell their property or repay the money.

With most mortgages, the focus is on the interest rate whereas with a reverse mortgage, the focus is on the value of the house. Reverse mortgages can give seniors the financial ability to lead an easier and comfortable life.

The main benefits of a reverse mortgage are -

A borrower does not require an income to qualify for reverse mortgage. His credit history is also not verified before approving the loan. Here the amount of loan is dependant on his age, the value of the property, interest rates and closing costs of home loans in the neighborhood of the borrower.
As long as the borrower or any co-owner occupies the property, there is no need of any repayment.
A borrower needs to pay off his pending debts before he can avail a reverse mortgage. But there are lenders including the state or local government agencies who may allow him to repay the previous mortgage after he pays off the reverse mortgage when required.
The amount received as reverse mortgage loan is not considered as income and hence the Internal Revenue Service does not charge any taxes on it.

Hope this information will help you.

Regards,
Blue

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I have provided my grandmother approx. 52K over the past 14 years as a reverse mortgage. I currently have a lien against her house for said amount. My grandmother recently passed away and I am not the executor of her will. My Uncle is trying to sign the house over to his son, who has no financial claim to the property. Can he do this? Can a title be transferred while a lien is in place?

Samantha · Posted: Fri Dec 16, 2005 12:05 pm Post subject:

Hi Anony,

Welcome to MortgageFit Forums.

I understand your confusion and the complicated nature of the problem. As for your uncle is concerned, he can't do this if the lien is properly documented.

As per the State laws a lien existing against a property must be paid off before the title of the property can be sold or transferred. I shall suggest you to consult an attorney with your papers.

Feel free to ask if you have any more doubts.

God bless you.

For MortgageFit,
Samantha

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What happens to the house after the borrower dies ?

Jessica · Posted: Thu Jul 27, 2006 8:49 pm Post subject: RE:

Hi,

The house will remain with the heirs of the borrower provided the reverse mortgage loan has been paid off. If the loan is not repaid, the lender will take over the ownership rights.

Regards,

Jessica.

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i am interested in availing. but no nationalised banks except PNB IS IMPLEMENTING IT.EVEN THIS BANK PROVIDES ONLY MONTHLY PENSION . THEREIS A PROVISION FOR LUMPSUM PAMENT FOR VARIOUS PURPOSES AS APPERD IN TIMES OF INDIA ON 16-06 2007 .HAVE THESE MODIFICTIONS BEEN COMMUNICATED/WHEN WILL OTHE BANS TAKE UP THIS SCHEME

Guest 0.10 Dollars($)

i am interested in availing. but no nationalised banks except PNB IS IMPLEMENTING IT.EVEN THIS BANK PROVIDES ONLY MONTHLY PENSION . THEREIS A PROVISION FOR LUMPSUM PAMENT FOR VARIOUS PURPOSES AS APPERD IN TIMES OF INDIA ON 16-06 2007 .HAVE THESE MODIFICTIONS BEEN COMMUNICATED/WHEN WILL OTHE BANS TAKE UP THIS SCHEME

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The ICICI bank is studying the market currently and will launch reverse mortgage very soon. By June, 2007 the Bank of Baroda had intially planned to introduce the product within next 3 months, that is in September.

You can just contact the bank officials or the customer care department to know more about this.

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