If reverse mortgages were a prospective way for you to get cash from your home, you may be happy to know that it seems they have gotten a bit cheaper for homeowners. Once known as one of the most expensive ways to convert home equity into cash, now thanks to shifts in mortgage rates, lenders have cut costs to drum up business, making them much more desirable.
The Deal with Reverse Mortgages
At one time, getting a reverse mortgage was a way for homeowners over the age of 61 to convert their home equity into cash at a cost of somewhere around 5 percent of a home’s value. However, because home-equity conversion mortgage volume fell 22 percent between Oct. 1, 2009 and March 31, 2010, a huge drop from the same period a year earlier, they’ve become a focal point for homeowners looking for cash again.
How Do They Work?
If you don’t know how the reverse mortgage works, here’s a quick breakdown. Basically, in order to convert your home equity into cash, instead of you writing a check to your bank every month, the bank pays you a lump sum, a line of credit or monthly payments. It is considered a loan and is due back when you die, move, sell the house or fail to pay property taxes or homeowner’s insurance.
At this point, Genworth Financial Inc., Bank of America Corp., Wells Fargo & Co. and OneWest Bank’s Financial Freedom, along with other lenders, have dropped or reduced their origination or service fees – or both. This means, some homeowners who hadn’t qualified for a large enough reverse mortgage to pay off the mortgage (a required for getting the loan approved), now have a chance.
Some experts think this trend could continue for some time, so if you’re looking for this type of loan, now may be the time to get in on the action.
