Ask the Dolans: Is a reverse mortgage a smart move?
Filed under: Banks, Borrowing, Debt, Real Estate, Saving, The Dolans
Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.
Click here to ask Ken and Daria your question.
A reverse mortgage can sound like a tempting concept: Instead of you sending a mortgage payment each month, you receive one from the bank. Gee, just tell us where to sign up!
Not so fast. Reverse mortgages can be complicated and expensive, so you need to know how they work – especially in the midst of a financial crisis. Our video response explains what to watch out for, when they can work best for you, and what factors to consider before signing up.
Learn more about reverse mortgages at Dolans.com, where you'll find complete information on refinancing and saving big bucks on your payments.
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Reader Comments (Page 1 of 1)
11-14-2008 @ 9:30PM
Tom MacDonald said...
A comment about the Dolans suggesting doing a reverse mortgage in a declining market is a bad time.
1. The value is set by an independent appraiser who does his/her best effort to establish a fair value based on recent sales (not listings but actual sales) that are as near geographically and similar in size to homes that have sold recently.
2. In a declining market, they may apply a subtraction approximately equal to the declining rate for that market based on the number of months since the sale of one of the comparable homes. For instance, in a 12% declining market, a 3% subtraction may be made for a home sold 3 months ago.
3. The FHA maximum for reverse mortgages is $417,000 (HUD didn't put the $625,500 amount into effect). Any appraised value above $417,000 will maximize how much money is available in the reverse mortgage.
4. Waiting, in a declining market, will likely result in lower and lower appraisals. This means less money for any homes near or below the $417,000 amount.
5. The Dolans take that it wouldn't make sense for a lender to allow the most money now seems to make common sense. However the system doesn't work that way. One factor that they referred to - the MIP that insures the loan - makes sure the lender can't lose money. Like all kinds of insurance, a large pool of people (in this case, the borrowers) pay into the system to provide for losses of the actuarially few.
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11-25-2008 @ 12:43AM
Dino Jacob said...
Good information provided. I have gone through http://www.123refinanced.net/ for getting information about rates and i find it good also.
But This entry about reverse mortgage is good.
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