Reverse mortgages have the benefits for people over 62 to free up monthly cash flow by purchasing a home and not having a monthly payment. The lender actually pays the buyer to live there! The equity from the downpayment used to purchase the home is disbursed back to the borrower over a certain term. This allows for an elderly qualified buyer who may be retired to use their home equity as actual monthly “income” for their everyday lifestyle. Some people, especially heirs, may have an issue with this because there is false beliefs that they lose the home shall the borrower decease down the road. This is not the case. They have 6 months to retain the home after the elder has deceased.
There are many other ways that this helps increase cash flow by allowing the equity in a refinance to be used to purchase other properties, other investments, or any further use the customer may see fit to help improve their cash flexibility.
Reverse Mortgages are NOT a bad loan. People have perceived a bad taste in their mouth about reverse mortgages. However, these people need understand that there are benefits to this program that may benefit a particular person or their situation. As for any home loan, not all programs apply for everyone.
Information provided by Aaron Thompson of Legacy Mortgage
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FHA Monthly MIP has been decreased! The monthly premium used to be 1.35% and is now only .85%. This is a huge break through after FHA has continued to increase the premiums over the last couple of years to offset their foreclosure debt. Now that they have recouped their costs from the collapse of the real estate market, they are giving the benefits back to today’s home buyers with a lower premium.