Mortgage Refinance or Reverse Mortgage??
Many people will decide for some reason that they prefer a 30-year fixed rate refinance versus a Reverse Mortgage. For years I have not looked that far into it because my parent company: SMG mortgage is a top 3 Alabama lender 5 years in a row! But I also work with people that had done a refinance at at later age not that long ago and now with a fixed income, they no longer want the payment. The ones that I turn over to SMG mortgage for a refinance are all doing it to obtain money, but they for one reason or another decided against the Reverse Mortgage. A national news article peaked my interest, so I did some math.
Let’s say a person took out a 30-year fixed refinance at age 65 and received $300,000. Loosely based on 3% interest rate, his monthly payment would be about $1500. That equals $18,000 in annual mortgage payments. Over 1 decade they would have paid out $180,000, and in 15 years (half the length of the mortgage he would have paid back $270,000!! At this point he is eighty and things like financial investments or in home care may be a need at this point. He can take out a Reverse Mortgage because his loan is one-half paid down. It really does not seem like a fix because he paid almost what the mortgage gave him but has 15 years more of payments. The Reverse Mortgage also has FHA insurance that says the heirs cannot be handed a debt. The heirs can sell the house most times and make a profit, pay back the reverse Mortgage lender and keep the rest. Furthermore, the heirs have a year to do so. I am sure on a traditional mortgage the time to do this is much shorter.
My conclusion was the person who needed money instantly and took the re-finance route have not really thought about the fact that most of that money if not all is used paying the mortgage down.
Do not hesitate to call Scott Underwood. A trusted expert in the south with over 15 years Reverse Mortgage experience. I can be reached at (205) 908-2993 or scott@reversemortgagealabama.com. Offices in Birmingham, Huntsville, and Mobile, Alabama. Also covering the southern states such as Mississippi, Georgia, and Tennessee.
