Reverse Mortgage ? Be Sure You Need It Before Applying For One

Reverse mortgages used to be considered the last resort of desperate retirees who needed to borrow against their home equity in order to pay for medical expenses. With home prices across the country rising at astonishing rates, more and more retirees, aged 62 and over, are taking out reverse mortgages to fund better retirement living. A reverse mortgage works more or less the opposite way from a conventional mortgage; the borrower receives payments from the lender in the form of a lump sum, a line of credit, or monthly payments. The amount borrowed constitutes a lien against the home must be repaid upon the death of the borrower, or when the home is resold. There are costs associated with a reverse mortgage, however, and potential borrowers should be aware of these when considering taking out such a loan, particularly if the borrower takes out a line of credit.

All loans have fees associated with them. There are home appraisals, paperwork fees, mortgage insurance fees, and additional "points" added to the cost of the loan. In general, the costs of taking out a reverse mortgage are higher than those associated with a traditional mortgage. There are several reasons for this, including the fact that the time period for receiving repayment of the loan is indefinite, typically depending on how long the borrower lives. This uncertainty is added into the loan in the form of additional fees.

Most people who take out a reverse mortgage opt to take their funds in the form of a line of credit, rather than a lump sum or monthly payments. There are advantages to a line of credit, which allows the borrower to use the funds by simply writing checks against the loan. The primary advantage is that the borrower only uses the funds when he or she needs them. Because of this, interest only accrues on the money if the borrower actually writes checks. Borrowers should be aware, however, that the costs of the loan, which can be substantial, apply even if the borrower doesn't write any checks against the loan. If the homeowner takes out a line of credit and decides to sell the home shortly thereafter without ever having written a check against the loan, the borrower will not owe the lender any interest or principal, but the borrower will lose the money paid for the cost of the loan, which is not refundable. If the borrower rolled the costs into the loan itself, they could owe payments even if they never wrote a check.

In short, borrowers considering taking out a reverse mortgage should make sure that they plan to stay in their home for quite some time and that they actually need the money from such a loan. A reverse mortgage is a great idea for those who have a specific purpose or use in mind, but as an emergency source of "rainy day" funds, it can be an expensive choice.

©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation information and HomeEquityHelp.net, a site devoted to information on home equity loans.

---

Buying a Home With Bad Credit - Tips on Finding the Right Broker or Lender

You can buy a home with a bad credit record;... Read More

Who Else is Ready to have Their Money Work Harder for Them?

What does it mean to refinance? Why would anyone want... Read More

Mortgage Information

A mortgage is borrowing money using property as a security,... Read More

Residential Mortgage - Finding The Best Home Mortgage Lender

Most people approach the act of getting a home mortgage... Read More

Home Mortgage Refinancing ? What?s in Your Contract?

Are you one of the millions of Americans who will... Read More

Shopping for a Mortgage, Avoid Three Common Mistakes

Buying a home or refinancing one is perhaps the largest... Read More

Home Equity Loan ? Not Just For Home Repairs, And Tax Deductible, Too!

Thanks to the combination of low interest rates and skyrocketing... Read More

Key an Eye on Your Mortgage Payments

In previous decades, when a borrower missed a payment on... Read More

Who Could Benefit From A Reverse Mortgage?

What is a "Reverse Mortgage?"Also known as a Home Equity... Read More

How I Became a Hard Money Lender

Unlike other investors, my venture into real estate was a... Read More

Bad Credit Mortgage Loans - Are You Killing Your Chances of Getting Approved?

When you have poor credit, your list of lenders that... Read More

Secured Lending - a Guide to Releasing the Value in Your Home

The recent boom in house price values have made some... Read More

Home Mortgage Loan Refinance ? Benefits To Refinancing Your House Online

Here are some of the benefits to doing your home... Read More

Bankruptcy and Buying a Home

Filing bankruptcy is a stressful time in a person's life.... Read More

Buy a Home With a Government Grant? Avoid this Scam

If you watch enough late night television, you'll see advertisements... Read More

Home Loans -- Federal Regulators Warn Lenders to Be More Careful

Federal banking regulators have recently expressed some concern over the... Read More

What Exactly Is A Reverse Mortgage And How Does It Work?

A reverse mortgage is a certain loan that allows the... Read More

Understanding Mortgage Points

When a mortgage broker asks a borrower to pay points,... Read More

How to Get Cheap Home Loans with a Bad Credit

It's been years since you made any major improvements to... Read More

Mortgage Loans For People With Adverse Credit - How Much Should You Borrow

"How much should you borrow?" is a question people with... Read More

Life of an Escrow

Escrow is one of the last stages in the purchase... Read More

Mortgage after Bankruptcy - Bankruptcy Discharged Yesterday? Purchase a Home Today!

So you have been through a bankruptcy and surely have... Read More

First-time House Buyers: to Buy or Not to Buy; that is the Question

Buying your first house is always a difficult time. There... Read More

Home Owner Loans Explained

How To Release Equity Locked Up In Your Home For... Read More

What is a Remortgage?

A remortgage is changing your mortgage without moving your home.... Read More

What is a Buy To Let Mortgage?

A buy to let mortgage is a mortgage on a... Read More

Avoiding Foreclosure Scams

If your mortgage company is threatening foreclosure, there are things... Read More

Escrow Accounts, Do You Absolutely Need One?

With escrow accounts the money for your home insurance and... Read More

Securing the Best International Mortgage for Your Home in Spain

Are you one of a growing number of people planning... Read More

Types of Financing for Your Mortgage

When financing a home purchase, the kind of mortgage you... Read More

Home Equity Loans

A home equity loan allows you to cash-in on the... Read More

Get the Best Rate on Your Home Mortgage Loan

Home mortgage interest rates hit record lows in 2004 and... Read More

Making Sense of Mortgage Speak

Applying for a home loan can be overwhelming. You will... Read More