Let’s look at what some alternatives are: You could move, but what would be the cost of moving? While you probably could get a quote for moving your household, what price can you put on the emotional cost? When you have lived on your home for several years, if not decades, you have everything where you want it. You know where it is and the memories run deeply. So is it worth moving, and turning your entire life upside down? If you do move, there are more things to consider.

If you choose to keep the home, you need to decide if a rental property is something you will want to deal with. You’ll need to consider the expense and hassle of screening tenants and time needed to clean up the property between each tenant when they move out.

I would imagine that you’re thinking; no way, I am not going to rent. I will sell my home. Well if you did your homework and calculated the numbers for what it costs to move, this step will be easy. Take the cost of the movers and then add the real estate commissions to that. The normal commission of 6% of the sales price goes to the Realtors. Plus you will probably get to pay some, if not all, of the closing costs for the buyer. Don’t misunderstand me, there are times when selling makes sense. I just want to shed light on all the angles for you.

Well that brings us to what the fees are for a reverse mortgage. The cost of a reverse mortgage is somewhere between 2% and 5% of the appraised value, depending on your loan officer. It is actually less expensive to do a reverse mortgage than it is to sell. It is definitely easier and less stressful than moving, giving you a home to live in for the rest of your life. On top of it all, the fees have been so drastically reduced, that they compare to a traditional mortgage, and the interest rates are at an all time low.

The exception: If you know that you are going to move in the next few years, it may not make sense to do a reverse loan. I am not talking about a possibility of moving someday. I mean, if you know you are going to sell this home and move to a warmer, dryer place in 2 years. A definite plan should be in place. If this is the case, you are probably right; it would be too expensive to do a reverse mortgage only to sell shortly after.

Looking to get more information on reverse mortgages? A little more education on the reverse mortgage programs available will help you make your decision. To see what you qualify for, use our FREE reverse mortgage calculator.

A traditional loan will require you to fix the problems before you get a loan, where a reverse mortgage is more lenient and will allow the repairs to be completed after the loan proceeds are received. This allows you to use the equity form your loan to do the repairs you may not have been able to afford otherwise.

Let’s look at some very common scenarios: 1. You have a deck that has had indoor outdoor carpet on it (you know, the green carpet that looks like grass), and the boards under it have dry rot. 2. Or maybe the southern exposed side of the home has very little, if any paint on it. 3. Sometimes, a tub or toilet area has a squishy floor indicating dry rot.

All of these instances can be cured after the loan is completed, as long as the repairs do not involve safety or health issues. You can’t wait for improvements like getting water to the property, but fixing a roof or repairing dry rot is common and won’t create any delays.

How does the lender handle these repairs to make sure they get done? I am glad you asked. You will have to get a contractor’s bid for the repairs and then add 50% to that bid. The extra 50% is to cover any miscalculations to make sure that there is enough money to cover the costs and that you don’t run short. That amount of money is held in escrow, commonly called an “escrow hold back”. Once the repairs are completed, the lender will pay the contractor and refund the remaining money to you.

Are you thinking you want to the repairs yourself and save some money? It is allowed, but there will still need to be a licensed contractor that gives you the bids. It is the starting point to know how much money needs to be put in an escrowed holdback account.

Let’s summarize what you just learned: The proceeds of your loan can be used to do the repairs, making a reverse mortgage a unique loan. The escrow holdback will be required even if you choose to do the repairs yourself.

Before you know what you can do, you need to know how much you qualify for. Use our free reverse mortgage calculator to quickly estimate how much money is available to you. There is also plenty of reverse mortgage information that will help you become educated before you make your decision.

a. Remember the 1099 form you get that shows how much interest you paid? You won’t be getting that after you complete a reverse mortgage. Since you have accrued interest and not paid interest, there is nothing to write off. Once you pay the interest, you will get the write off, but normally that occurs when the home is paid off.

b. Is the write-off more important to you than the lack of house payments? Many would prefer the no house payments or the opportunity for increased income to getting the interest write-off.

2. Interest accruing or a balance getting bigger:

a. If you don’t make any payments on your loan and the lender is charging interest for that loan, your loan balance will grow. They just put the accrued interest on the end of the loan, adding it to your existing balance.

b. You are exchanging a larger payoff tomorrow for no payments today. Reverse mortgages are usually paid off when the borrower passes away, thereby deferring payments permanently.

3. Reverse mortgage fees are expensive:

a. Reverse mortgages are traditionally expensive compared to a regular loan. The thing to consider is that on a regular loan you have to make payments and on a reverse loan, you don’t. I guess “they” feel the extra expense is justification for more fees.

b. With the development of new programs, you should be able to get a reverse mortgage for about half the prior cost. If the expense of the loan was the reason you didn’t do the loan before, check again. You should be pleasantly surprised on how in-expensive the fees are now.

4. Your kids will get less money:

a. It will reduce the amount you leave as an inheritance, if you spend your equity. This could be really important to those who want to leave a sum of money to their heirs, but there are alternatives to how you leave the “money”.

b. Are you really depriving anyone by spending your equity? If you have a mortgage, and you remove the monthly expense, this will leave you more cash to save or spend to maintain your independence. Your heirs may not have to chip in to help you survive. That alone saves them money and enhances their future retirement. If you have no mortgage, getting monthly income or a lump sum of money will help take care of your home and medical expenses.

You will see there are two sides to these so called “reverse mortgage disadvantages”. Just weigh the objection against the need to see if the loan makes sense to you.If you would like to bounce some ideas off of someone, email me or give me a call. You can get my contact information online at www.redwoodreversemortgage.com. You will also find a lot more information on reverse mortgages there.

Have you heard other reverse mortgage disadvantages? Click the links if you are looking for more information on reverse mortgages. You can get a free education with no obligation. You can even use our free reverse mortgage calculator.

Lifetime mortgages are calculated on the basis of interest and principle and addition if any. Since no monthly payments are made, the interest is compounded against the principal loan amount at the unchanging rate of interest. Annual rate of interest is less then the monthly rates. As long as the mortgage loan remains integral, the interest will continue to be charged to the rising principal amount. Repayment of the mortgage loan is made when, either the property is sold or after your death.

Lifetime equity release is a reasonably simple and recommended product.

Features of Lifetime equity release

- Monthly repayment is not required.

- Cash released can be taken as a tax free lump sum.

- Inflation do not trouble you as the interest is fixed.

- You may be able to assure and safeguard a percentage of the property value for your successors.

Key features to consider while applying for a Lifetime equity release

- Draw-down facility.

- Increasing fund reserve

- Guarantee of equity released.

- Early repayments penalties

- Interest calculation Method.

Costs of a Lifetime equity release

When you decide to move on with a mortgage application, your house will be evaluated and valued by the loan provider. This will calculate the value of your house and the exact amount that can be released. Although some loan provider give free evaluation and no lender arrangement fee, still the cost of the evaluation is up to you.

Valuation Fee:

The amount of the valuation fee will be dependent on the value of your house or property. Considering a rough estimate, with a property value of $ 200,000 you can expect to pay in between $ 400 – $ 600.

Additional costs will depend on the amount of equity you would like to release and type of plan you choose.

Lender Fee:

It includes understanding, completion and application fee and covering administration costs and are normally between $250 – $600

Solicitor’s Fee:

These are slightly lower with firms that specialize in equity release; otherwise it can vary widely among solicitors. A standard charge would be $ 300 – $ 500

Insurance:

The loan provider would prefer an insurance policy. The charges depends on the size and type of property you live in.

Learn about the benefits of lifetime equity release and what equity release is at onlineequityrelease.com

Actually, there is nothing different about a reverse mortgage, compared to a traditional mortgage when it comes to ownership. Your home becomes the collateral for the bank with either loan. Because you still own the home, you retain all the ownership rights. You are allowed to sell or refinance without any penalty at any time. In the event that you choose to sell your home, the lender will need to be paid off and any remaining equity will go to you or your heirs.

Usually, the confusion on this topic is when someone is thinking about is a life estate. This is where you sell your home to an investor, and they allow you to live there until you die. Normally this is done with a property that can be developed and in this case, you do give up the property. Don’t confuse this with a reverse mortgage. They are two different programs, not related in any way.

Just to clarify another point before you have to ask, the State does not take your home either. As long as you maintain your property taxes, you will be in their good graces. By the way, if you live in Oregon, you can have your property taxes deferred. Don’t do it before you get your loan, or you will have to pay them off. But instead, do the reverse mortgage and after that is complete, you can defer your property taxes.

Remember, your home is yours. You will never be required to give up your home just because you did a reverse mortgage. You can sell or refinance at any time without penalty. Any remaining equity is yours to do with as you please.

If you pass away while having a reverse mortgage, your heirs will inherit the home, along with it’s equity and mortgage. If they choose to keep the home, they will have to refinance into their name or pay it off. If the home is sold, any remaining equity after the mortgage and fees are paid will go to your heirs.

Prior to committing to any reverse mortgage programs, get the facts. Visit our website for more reverse mortgage information. Use our reverse mortgage calculator to get an idea of how much money is available to you.

1. Can I do a reverse mortgage if I owe nothing on my home? This may sound obvious, but absolutely. This allows for more available cash to take care of any non mortgage obligations you may have.

In the event your home is not paid off, you still could qualify for a reverse mortgage. Your mortgage will have to be paid off first (with the reverse mortgage) then any remaining proceeds can be taken as a line of credit, monthly income, or a lump sum.

2. I am behind on my taxes, can I do a reverse mortgage? This is one of the great reasons to do a reverse mortgage. You will have a chance to get caught up and get the tax man off your back. If you live in Oregon, consider deferring your property taxes once the reverse mortgage is complete.

3. Does the Bank take the title to my home? The title will be used as the collateral, but you don’t give up your home. It is still your home and you retain all rights to refinance or sell. any remaining equity always belongs to you or your heirs.

4. Can I use a reverse mortgage to purchase a home? As of January 2009, there is a program that allows you to purchase a home with a reverse mortgage.

5. What happens if I use up all my equity? It takes a long time to “use up” your equity. If your home appreciates at all, the time frame to use up your equity is usually 20-30 years. Using an amortization schedule will show you the expected time frame and how much equity (approximately) you have in the home. In the event you do use all your equity up, the lender cannot force you out of your home. The note is written to allow you to not repay the loan until you no longer live there as your primary residence.

Visit our website if you want to see more frequently asked questions and answers about reverse mortgages. You will find a large amount of educational information for free. Get informed before you make your decision.

1. Lump Sum – You have the option of taking all the funds available to you at one time. You can use the money for anything you want, but the most common use is paying off the existing mortgage (if you have one) on your home.

2. Monthly Payments – Payments to you that is. The two options are payments that continue for a specified amount of time or a lifetime payment. Since the lifetime payment continues for both your and your spouse’s lifetime, it is the most common choice.

3. Line of Credit – Why take the money and get charged interest if you don’t need the money? This is a good option for you if you are more comfortable using the line of credit for a reserve account in case of emergencies. Since it is not borrowed, you don’t accrue interest until you actually use the money.

4. A Little of Each – If you don’t want to be tied down to one choice, then you can mix and match the above choices. It will allow you to have a line of credit for use later, a monthly income for life, and a lump sum withdrawal that you can use for anything you want. At any time, for a small fee, you can alter your program to tailor it to your current needs.

If you choose anything other than a lump sum, know that you will have to take the adjustable rate mortgage (ARM). There is only one option if you choose the fixed rate. It is a lump sum. You will have to draw it all when your loan closes.

Before committing to any reverse mortgage programs, get the facts. Visit our website for more reverse mortgage information. There is also a free reverse mortgage calculator to see how much money is available to you.

While there are definitely times where a short term fix is needed, the cost of a reverse mortgage usually makes it more beneficial if you are going to keep it for several years. If foreclosure is imminent or there are repairs that need to be made to your home that can’t wait, then it makes sense short term. Knowing the actual fees associated with your new loan will help you determine if it makes sense for you. A trusted loan officer will be able to guide you, but ultimately the decision should be yours.

2. Losing Your Government Benefits Because of a Reverse Mortgage Loan.

The most common benefit we are talking about is Medicaid. There is a restriction on how much cash and assets you can have when being on this program. This can happen when a senior takes a reverse mortgage and gets a lump sum of money to do some repairs around the house. They get $20,000 to do a new roof and some much needed deferred maintenance, and put it in their bank account. While the repairs are being done, the money sits there and when the new month comes around, Medicaid disqualifies you for “having too much money”. Another example is; if you are short on money each month, say $200.00, and you opt to get a monthly income of $400.00. If you make the mistake of saving the extra money, you could, after several months, disqualify yourself when your savings gets “too large”.

3. Using an Inexperienced Loan Officer to Process Your Reverse Mortgage Loan.

Can you believe that a loan officer at a bank doesn’t need to be licensed? There is no state licensing or education required on the proper way to handle loans. Just about anyone can qualify to be a loan officer in a bank. If you just walk in and say, “I would like to be a loan officer”, you will probably get a desk and a name badge. Call it biased if you like, but I prefer the idea of talking to a trained professional and would like to see a license showing that they can be held responsible. Because the commission is usually pretty good, a loan officer new to the business will sometimes try to make as much money as possible on your loan. Since the terms are all pretty much the same wherever you go, you should really interview your loan officer and test their knowledge. Make sure that you are comfortable with them, as you are trusting your future finances to them.

4. Avoiding a Reverse Mortgage Loan Because of Fear of the Unknown.

It seems very common to find people that are afraid of a reverse mortgage just because they can’t find someone that they can trust to explain it in a way they can understand. When it sounds too good to be true, they tend to shy away. Let me start by saying there are always “experts” on topics that they know nothing about. Even for someone who knows the truth, it is almost overwhelming the amount of disinformation being spread. Some financial planners will tell you that you could lose your home. Others will say you are going to leave more debt to your heirs. In an attempt to soothe your concerns, here is a little advice. First, find a loan officer you trust. If you are uncomfortable with your current loan officer, find another one. You are not obligated to anyone just because you talked to them first. Second, don’t listen to everyone’s advice that throws it at you. You can read the article “Bad Advice From Good People about Reverse Mortgages” and get an in depth look at who to listen to. To summarize it, you should look to get advice from the professional in the field. Your financial planner may be great with your investments, but has probably never originated a loan. It is always recommended to get advice from your loved ones, but make sure they know what they are talking about. Maybe invite them to listen in on your next meeting with your loan officer. Also, please don’t disqualify yourself because you think you may not qualify. Just to reiterate, get the advice from a professional in the mortgage industry that specializes in reverse mortgages.

5. Moving Too Quickly During the Reverse Mortgage Loan Process.

It only takes about 10 minutes to teach you everything you need to know on a reverse Mortgage Loan. But you will probably have questions that will make you more comfortable when you get the answers. Sometimes these questions take a little time to formulate, so don’t let your loan officer rush you into making a decision. Don’t mistake doing your loan quickly with pushing you to make up your mind in a hurry. Once you have determined you want a reverse mortgage, the process should be fairly quick. It will take about a month to a month and a half to get your loan closed.

6. Try to Get More Money by Waiting Until You are Older

Here is a bonus mistake. Remember your age and the value of your home combined with the interest rate determines how much money is available to you. While being a few years older can net you a few thousand dollars more, an interest rate change of 0.5% higher can make tens of thousands of dollars less available to you. So while it is true that you get more money when you are older, you have to consider that the interest rate will probably go up. Then any age benefit you were getting will be lost.

Read more about reverse mortgages at Redwood Reverse Mortgage. David Prulhiere owns Redwood Financial Services and specializes in reverse mortgage education and loans.