Reverse Mortgages getting more competitive IF you are a savvy shopper

The Wall Street Journal recently ran "Reverse Mortgages Look Better" with the premise that the consumers position has changed from learning about reverse mortgages to shopping for the best product for them.  

Upfront fees on reverse mortgages have fallen substantially in recent months, giving homeowners interested in this product a new challenge: how to compare offers to find the best one.

"Quite a few of the lenders now have reduced the origination fees," says Barbara Stucki, vice president of home-equity initiatives for the National Council on Aging. "Some of them are getting rid of the origination fees. Some are willing to pay some of the mortgage-insurance premium fees upfront."

In my prior post "Reverse Mortgage Basics - A Tool to be Reconsidered" I pointed out the amount of the mortgage does not change from company to company - the amount you can get is fixed based on your age, interest rates, and the appraised value of the house.

What you can shop for is how much getting the mortgage is going to cost you.  This is where can you save huge dollars.  If you are considering a reverse mortgage, meet with brokers from at least 3 different companies.  Some of the questions to ask include "What are the fees, in detail".  For more information, AARP has a Reverse Mortgage Guide.

Thanks to Denis Ciklic at Bank of America for bringing the article to my attention.

 Image: jscreationzs /

Reverse Mortgage Basics - A Tool to be Reconsidered

Are reverse mortgages great for every senior?  No.  However, they can be a very useful tool to many seniors that is often overlooked as the senior and their family have read and heard stories about bad experiences with reverse mortgages.  

A reverse mortgage itself is neither good nor bad - it is a tool that may or may not help fix a problem. In my experience "bad" reverse mortgages occurred where it was not the right solution for the problem - a reverse mortgage was "sold" to the senior instead of being presented as a solution to a problem after careful analysis.

A reverse mortgage can be a solution to a myriad of problems because it allows people over the age of 62 to tap into the equity in their homes without increasing their monthly expenses.  This equity can be used to pay for whatever you need - an addition, home health care, loan to your kids so they can buy a  house, a new house for you.

From a timing perspective, anyone who has looked at reverse mortgages in the past may want to take a second look now as the market as changed.  New players have entered the market, and have eliminated their up front fees.  Others have now done the same to stay competitive.  This means that $5000 - $12,000 of up front fees that might have existed 3 years ago have now gone to the wayside - proof that a little competition can be be good for us all. 

Derek Jensen of Jensen Law Office did a great blog post this week "Reverse Mortgage Loans" where he details the trusts and myths about reverse mortgages - it is a great read about a tool anyone concerned about the costs of living as you age should read.  In the article he includes the following:

Virtually anyone can qualify. You must be at least 62, own and live in, as a primary residence, a home [1-4 family residence, condominium, co-op, permanent mobile home, or manufactured home] in order to qualify for a reverse mortgage.

There are no income, asset or credit requirements. It is the easiest loan to qualify for.

The proceeds from a reverse mortgage are tax-free and can be used for any legal purpose you wish:

daily living expenses
home repairs and improvements
medical bills and prescription drugs
pay-off of existing debts
education, travel
long-term care and/or long-term care insurance
financial and estate tax plans
gifts and trusts
to purchase life insurance
or any other needs you may have.

The amount of reverse mortgage benefit for which you may qualify, will depend on

your age at the time you apply for the loan,
the reverse mortgage program you choose,
the value of your home, current interest rates,
and for some products, where you live.