Reverse Mortgage- Comparing the tradeoffs

Comparing the Tradeoffs

Benefits

• Continue to live in and own your home
• Receive tax-free income from the cash disbursements
• Choose from monthly income, a line of credit, or a lump sum
• Repay the loan at any time with no penalty
• Owe nothing as long as you occupy your home
• No personal liability for repayment of the loan since it is secured solely by your home (you and your heirs are not personally liable)
• Pass the remaining equity in your home to your heirs

Costs

The total cost of getting a reverse mortgage is about the same as getting a
traditional mortgage on a new home.

Average costs of new home mortgage vs. reverse mortgage


Move into a new home FHA Reverse Mortgage

Fees (appraiser, termite 1% 1%
inspection, title, etc.)

Origination Fees 1% 2%

FHA Mortgage Insurance na 2%

Realtor Commission on sale 3% na

Total Cost 5% 5%

Interest Rate (2007 projected) 5.87% 5.95%


If your home is worth more than $400,000, you may be a better fit for the Advantage program because there is no upper limit to borrowing. The Financial Freedom Advantage program often has no closings costs.


Home Equity Loan vs. Reverse Mortgage

With a home equity loan you make monthly payments until the loan is repaid (in addition to your mortgage payments). You must also have a sufficient debt-to-income ratio to qualify and usually a good credit score. A reverse mortgage pays off any mortgages and is not affected by
income or credit score.

Bye for now