Reverse Mortgage: A Terrific Option, But Not the Only Option

Reverse mortgages are a tremendous tool to help elderly homeowners who don’t want to be forced to sell their houses - but they’re not the only such method, according to the Greater Tulsa Reporter.

Cindy Thomason, vice president and the head of mortgage lending for First Pryority Bank in Tulsa, says people anxious to keep their homes have other options at their command.

“Now we are just one of 100 test banks that Countrywide Mortgage uses for reverse mortgages. This year they will be coming out with their own plan,” she said. “I hope the visibility of that plan will help us increase the awareness of our reverse mortgage business.”

What a reverse mortgage does is allow a homeowner to take money out of a house and never have to make a monthly payment. Neither the homeowner or any heirs will ever owe more than the home’s appraised market value at the maturity of the loan, which is when the homeowner dies or sells the property.

“But people have to realize that doesn’t mean a $200,000 house will bring in an instant $200,000 cash,” she said, urging caution. “Typically, a person who gets a reverse mortgage at the age of 62 can borrow 50 percent of the appraised value of their house, with that amount increasing as they get older.”

People who seek a reverse mortgage will have to attend a counseling session to help them set up a budget in most cases. There are some fees involved with getting a reverse mortgage, so a person considering them needs to do some research to see if this is their best option.

“Other plans, such as standard mortgages, might be more advantageous for an individual’s personal situation,” Thomason said. “A cash out refi helps a person get some cash in hand so necessary repairs can be made or living expenses met until the house sells.”

For people struggling with bills, there are services that offer assistance in such areas as medical and utility costs. Often people don’t know where to start looking for help when they’re behind on mortgage loan payments or other bills, but there are usually services in place for just such an occasion.

With interest rates still low, Thomason suggests people on adjustable-rate mortgages or especially interest-only mortgage products should soon consider refinancing to a fixed-rate loan.

“Often people get an adjustable rate mortgage to help them qualify for a low rate for a property they couldn’t otherwise afford. When the initial period runs out and the rate is adjusted it sometimes causes a hardship.”