I look at the reverse mortgage and on the surface everything looks great. An elderly person can receive money every month until the day they die. It certainly works in this economy where many of the seniors benefits have been taken away or limited.
Here are the problems:
- The valuation is done at the time that the reverse mortgage is taken out. In the case of one of my recent clients, their condo is only worth about $35,000 and when they called up the bank to see how much of a lump sum they can take out the bank told her $50,000. So she has been getting payments to her for over 2 years, and now she can take out an additional $50,000. Does this seem right? When asked further they mentioned that HUD guarantees the monies and that is why she is able to take out even more money than the condo is worth.
- Lots of upfront fees. It is very expensive in closing costs to take out reverse mortgages.
This product may help some people, but a very small amount, and these days many people will start to take out the lump sums and than let the homes go to foreclosure. Doesn't this put an additional strain on the government? Like we need any more of that?
David Serle
Vice President/Managing Broker
RE/MAX Services
561-912-3500 Office
561-912-3502 Direct
561-756-3104 Mobile
