Register or Sign in        Email This Page     Link To This Page    
Visit MND at MBA in NYC!
33,877
# of User Comments
 

Send Article via Email

REGISTERED USERS (Free!):
Can forward to 6 email addresses at a time. Register or Login

Registered users also get the additional advantage of Co-branded Emails and Landing Pages. Learn more about these features.

Your Name: 
Your Email: 
I want to forward this to
(Enter Email Address Below) :
Include a Personal Message (optional)

Please add 3 and 4 and type the answer here:
Leave this field blank.
Email Preview Below:
This feature is now 100% free. Learn More About Co-branded Email and our other Co-branded Services.
 
This email was sent to you by:
Harry Chriest |
Mortgage News Daily

Message:   YOUR MESSAGE HERE
Email alerts, such as this one, are a free service provided by Mortgage News Daily. If you would like to receive an alert when important news breaks please register to join our community.
How Do Reverse Mortgages Compare to Conventional Mortgages?
Posted to: Community Commentary
Monday, September 27, 2010 12:02 AM

Forward this email:  Send a copy of this story to someone you know that may want to read it.

A Reverse Mortgage is similar to a conventional mortgage because it is a lien against the property and the title remains in the name of the borrower.  As with the conventional mortgage, the borrower is responsible for maintaining the property and paying the property taxes and insurance and association dues if applicable.

The costs are also similar to the conventional loan including an appraisal, title insurance, settlement fees, origination fee, and recording fees.  Additional costs with the HUD Home Equity Conversion Mortgage (HECM) reverse mortgage are the FHA Mortgage Insurance Premium (MIP) and a monthly service fee.  Note that on a conventional loan the servicing fee is included in the interest rate, whereas it is a separate fee with the reverse mortgage.   If one is doing a "forward" FHA loan, they too will have the FHA Mortgage Insurance Premium.

To determine the loan amount on a conventional loan, the lender looks at the home value, credit worthiness, income, assets, and other potential risks that may be associated with loan repayment.  The reverse mortgage is different because there are no income or credit score qualifications.  The age of the borrower(s), the home value, and the expected interest rate are used for determining the loan amount.

With the conventional mortgage one receives a lump sum and has to make monthly payments.  With the reverse mortgage one receive cash without making monthly or immediate repayment.   Funds can be received in a lump sum, monthly payments, line of credit, or a combination of these.

A loan term or when the loan is to be paid in full with a conventional mortgage is usually set, i.e. 15 or 30 years.  A reverse mortgage is to be paid in full when the loan is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower.

As with a conventional mortgage, when the loan is due and payable, the house does not become the property of the lender.  The borrower or estate handles the repayment of the loan.  When the home is sold with either mortgage the loan is paid off and the remaining equity is the borrower's or their heirs.

The reverse mortgage is a non-recourse loan which means the loan is paid back based on the fair market value (generally from the sale of the home) with no personal liability to the borrower or the estate as long as they are not retaining ownership.

For seniors 62 and older, the reverse mortgage is generally more advantageous than a conventional loan.





More from MND:

 

If you would like to opt-out of receiving email forwards from this person please click here to remove your email address.

Forward this email:  Send a copy of this story to someone you know that may want to read it.

 

More From MND

Mortgage Rates:
  • 30 Yr FRM 4.44%
  • |
  • 15 Yr FRM 3.49%
  • |
  • Jumbo 30 Year Fixed 4.20%
MBS Prices:
  • 30YR FNMA 4.5 106-21 (-0-12)
  • |
  • 30YR FNMA 5.0 109-02 (-0-06)
  • |
  • 30YR FNMA 5.5 110-07 (-0-07)
Recent Housing Data:
  • Mortgage Apps 4.30%
  • |
  • Refinance Index 6.92%
  • |
  • FHFA Home Price Index 0.67%