Anyone With A Reverse Mortgage? (balloon payment, foreclosures, mortgage broker) - Arizona (AZ) - City-Data Forum

azloafer · 04-10-2007, 11:42 AM

I am wondering if any Arizona people have a reverse mortgage and would like to comment on how it works and if they feel it is a boon or a boondogle. I am somewhat reluctant to listen to the mortgage companies because they want to make money; I would rather listen to someone who actually has a reverse mortgage.

I am concerned that a person/couple could outlive the mortgage. I understand that the mortgage is somewhat like a loan that has to be repaid when the house is no longer occupied. Could a person actually owe more than the house is worth and have to come up with money when they leave the house?

Please help, thanks.

redwingfan1 · 04-11-2007, 10:30 PM

Azloafer,

I am a closing agent in MI, so maybe I can help. A reverse mortgage is pretty much exactly what it says. Instead of you "paying" the mortgage company a monthly payment on your home, the mortage company "pays" you, ie: monthly advancements on your loan, one lump sum at the time of closing, etc. You use the equity that you have built up in your home, and every time your "draw" or advance money, your equity shrinks and your debt increases. In Michigan, and I am assuming most states, you must have a home that is free of any other outstanding mortgages. The loan becomes due and payable upon your death, selling the house, or after a certain point in time if you should be put into a nursing home. Most of these mortgages have clauses so that you or your heirs won't have to pay back more than what the home is valued at ( protection in an adverse market ie: Michigan). I am also posting you a link: http://www.ftc.gov/bcp/conline/pubs/homes/rms.htm (broken link)

Personally, I wouldn't recommend a reverse mtg to anyone. But that is just my opinion. Hope this helps....RW1

azloafer · 04-12-2007, 08:48 AM

Thanks for the advice and the link!

redwingfan1 · 04-12-2007, 10:20 AM

You are very welcome! ...RW1

chionactis · 04-23-2007, 11:49 AM

hi, last march (2006) we refinanced our 2 mortgages because we were paying almost $3500/month since April 2003 and we were feeling pretty strapped. We used our mortgage broker, a very smart and creative man when it comes to finding a solution, and what we ended up doing is a cash-saver plan. In other words, every month you choose one out of 4 options for making a payment. We have done the minimum payment each time; NOW, since we have sold our house and are due to close at the end of May, we are not concerned at all, but there is a BIG catch. one, the interest rate changes every year on the anniversary of the loan to reflect the current rates, but there is a cap on how high it can go. second, if you only do the minimum payments, you are deferring all the interest on the loan, and eventually, you are going to be making HUGE balloon payments. we just got a letter from the bank which handles our loan telling us that the minimum payment will be close to, if not a little over, $4K/month within the next year! I would never do this plan again.

shariv · 04-23-2007, 03:39 PM

Quote:

Originally Posted by chionactis

hi, last march (2006) we refinanced our 2 mortgages because we were paying almost $3500/month since April 2003 and we were feeling pretty strapped. We used our mortgage broker, a very smart and creative man when it comes to finding a solution, and what we ended up doing is a cash-saver plan. In other words, every month you choose one out of 4 options for making a payment. We have done the minimum payment each time; NOW, since we have sold our house and are due to close at the end of May, we are not concerned at all, but there is a BIG catch. one, the interest rate changes every year on the anniversary of the loan to reflect the current rates, but there is a cap on how high it can go. second, if you only do the minimum payments, you are deferring all the interest on the loan, and eventually, you are going to be making HUGE balloon payments. we just got a letter from the bank which handles our loan telling us that the minimum payment will be close to, if not a little over, $4K/month within the next year! I would never do this plan again.

That is exactly why foreclosures are increasing by leaps and bounds. Also why lenders are going out of business at a rapid rate. You really need to read and understand exactly what it is you are signing.

azloafer · 04-23-2007, 03:52 PM

Anyone who has closed on their mortgage at a title company knows that you are signing papers for 30 minutes, non-stop. I would love to take those papers home and study them before signing, but I don't know of any title company that will allow that. They give you a sentence explaining each paper as you sign. There should be a better way!

A friend of mine closed at Wells Fargo. They told her that the interest rate was locked in just as she had wanted. Five years later she was notified that it was only locked in for five years! What a system!

MotleyCrew · 04-23-2007, 04:03 PM

They love to rush you through the process. My husband drove them nuts reading each word. They can give you a private room in which to do so. Take your time.

sablebaby · 04-23-2007, 04:22 PM

You HAVE to take your time and read EVERYTHING. Tell them to take a hike if they want to rush. There's no excuse for not knowing what your loan is about. Signing away your life on a big mortgage, you better know what you are signing!

cdennis · 06-16-2007, 07:19 AM

It would be nice if there were a simplification in the paperwork process. It seems as though there is a trophy giving in America for having the most paperwork for one process. The tax code is astronomical. At least buying a car is only one long page, but the contract has been simplified.

Moderator cut: signatures and promoting your business not allowed