Two Pieces of Reverse Mortgage Information Every Senior Needs to Know

As the baby boomers enter retirement, an increasing number of consumers are looking for reliable reverse mortgage information. A reverse mortgage is a unique loan that lets senior homeowners over 62 years of age borrow a portion of their home equity. Read on to discover two things you need to know about these unique loans. rnAs the baby boomers enter retirement, an increasing number of consumers are looking for reliable reverse mortgage information. A reverse mortgage is a unique loan that lets senior homeowners over 62 years of age borrow a portion of their home equity. For many, reverse mortgages have become a vital retirement tool. Since 1990, over 734,000 seniors have used a reverse mortgage to pay off their home and improve their finances. While this reverse mortgage information is certainly interesting, many consumers have heard several negative things about these loans. As soon as seniors begin looking for reverse mortgage information, many are warned that reverse mortgages come with high interest rates and outrageous fees. Due to the supposed high costs, many seniors are also told that reverse mortgages are only for the financially desperate. As it turns out, these rumors may not be entirely true. rnReverse Mortgage Information Regarding Closing Costs and Other Fees One piece of reverse mortgage information commonly shared with seniors is that reverse mortgages are expensive. There are several costs associated with reverse mortgages. Seniors must pay for an appraisal, origination fee, closing costs, and sometimes servicing fees. To get a federally-insured HECM, borrowers will also be charged an upfront mortgage insurance premium (MIP) as well as an annual MIP of 1.25%. Many of the fees associated with reverse mortgages are the same as those charged on forward mortgage loans. Regardless of the loan one chooses, borrowers will typically be required to pay for an appraisal, origination fee, and various closing costs. Because an HECM is a government-insured loan, all fees are subject to regulation. Lenders are limited on the amount they can charge borrowers, which keeps these fees fair and reasonable. When people talk about the high costs of taking a reverse mortgage, they are usually referring to the MIPs that borrowers are expected to pay. On the HECM Standard, borrowers pay an upfront MIP of 2% plus an annual MIP of 1.25%. To avoid paying the 2% upfront premium, seniors can choose the HECM Saver which carries an upfront MIP of 0.01%. Before taking any negative reverse mortgage information to heart, seniors are urged to research these loans for themselves. The costs of taking a reverse mortgage vary on an individual basis. Dismissing these loans as too expensive might end up being a pricey mistake. rnReverse Mortgages Are Not Just for Cash Poor Seniors Another piece of commonly shared reverse mortgage information is that reverse mortgages are only for seniors who are equity rich but cash poor. The fact is, reverse mortgages are not only for seniors in desperate financial situations. Financially-stable seniors can also benefit from these loans. Many seniors choose to take a reverse mortgage to add to their savings, create an emergency fund, or renovate their home to meet their changing needs. While reverse mortgages are not often thought of as a retirement tool, a person’s home equity is an important asset. If a senior needs addition cash, a reverse mortgage might be a beneficial way to provide additional funds during retirement.