Happy Flag Day!
Philip Moeller at U.S. News and World Report has published a fairly decent article on reverse mortgages. It is rare that we see articles in the media that are even a little bit informed, but this one is pretty good:
Is a Reverse Mortgage Right for You?
I would quibble with him on several points, one of which is his portrayal of fees. Everyone likes to point at the fees and say how high they are, but you have to recognize that without the FHA insurance, which is larger than the lender’s origination fee in his example, reverse mortgages would probably not exist. Would you loan someone a large sum of money, without any periodic payment, and with absolutely no idea when it would be repaid? Probably not! So, the FHA insurance is simply the price we pay for being able to do this. Also, he shouldn’t have lumped the servicing set-aside in with the list of fees that have to be paid upfront. The servicing set-aside is just that – it is a portion of the home equity that is set aside to cover the lender’s monthly fee for sending you a monthly statement. It is approved by the government, and is not paid at closing, nor is it part of the loan. You don’t pay interest on it, and any amount not used when the loan is due belongs to you. If you have any questions, feel free to comment on this post, or go to the “Ask a Question” page.
