Here’s a Great Example of Someone with No Understanding of What a Reverse Mortgage is

I have no idea who Harold Groves is, but he posted on a Stock market Review Blog, his opinion about how a Reverse Mortgage works. This would be good, if he had any idea what a Reverse Mortgage was.

The easiest answer is “it’s just the opposite of a regular mortgage!” I make payments to the lender with a regular mortgage, so a reverse must mean that the lender makes payments to me!

The truth is that only a fraction of reverse mortgage borrowers receive monthly payments for a few reasons:

1) Most reverse mortgages are paying off an existing loan and the amount that is left for monthly payments is limited or non-existent in many cases.

2) More than two-thirds of current borrowers are taking a fixed-rate loan  because of the assurance of where the rate will be and because it gives more proceeds that the adjustable rate option.  Monthly payments are not an option for the fixed-rate loan.

3) The line of credit option has always appealed to borrowers more than monthly payments for three reasons A) The unused portion of the line grows over time B) If the proceeds stay in the line, they cannot affect Medicaid or any other needs-based programs C) No interest accrues on what’s available until it’s used.

So the simple, ignorant answer is not really accurate. At least he didn’t knock the product like so many other people who don’t understand how Reverse Mortgages work, but just assume that they must be “bad.”

Here’s the link to the blog post:

http://www.stockmarketsreview.com/realestate/2010/04/11/reverse-mortgage-what-you-need-to-know-about-it-by-harold-groves/