DEAR BOB: I carry a senior citizen reverse mortgage with a $100,000 line of credit. The market value of my home is about $500,000. I pay a hefty PMI (private mortgage insurance) charge each month. Since there is no default danger for the lender, as my house is worth far more than the mortgage balance, what is the lender insuring against? How can I get out of these PMI payments? – Joseph I.
DEAR JOSEPH: You are being ripped-off by your reverse mortgage lender. However, I suspect you were “conned” into an FHA reverse mortgage without realizing the costs and limited benefits.
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FHA reverse mortgages require payment of mortgage insurance fees for the life of the FHA reverse mortgage. Unless you are using that $100,000 reverse mortgage credit line, I would terminate it by obtaining a home-equity credit line elsewhere from virtually any local bank to pay off your balance.
Unfortunately, your situation is a very bad example of how some reverse mortgage lenders take unfair advantage of senior citizens just to earn a loan origination fee. Pros and cons of reverse mortgages are explained in my special report, “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
WHO PAYS FOR HOMEOWNER’S TITLE INSURANCE?
DEAR BOB: In a recent article, you said, “The best way to eliminate or at least minimize title risks is to always insist on receiving an owner’s title insurance policy.” What do you mean by “receive?” Do I just request a copy of the owner’s title policy or should I ask the existing title insurance be transferred to me as the new owner? – Mark S.
DEAR MARK: An owner’s title insurance policy only insures the property buyer and his or her heirs. It cannot be assigned to future buyers.
Every person who acquires title to real estate should always obtain an owner’s title insurance policy to be certain of receiving marketable title. The only exception occurs if you buy at a foreclosure or tax sale where title insurance is not available.
In some states, the buyer usually pays for his/her title policy. But in other states, it is the routine for the seller to purchase the buyer’s title policy. This custom can even vary by county, as it does where I live.
To illustrate, suppose your wonderful Uncle Jake gives you his property. It is very important to also get an owner’s title insurance policy (even if you pay for it yourself). The reason is Uncle Jake might not realize he has unpaid liens, such as for property taxes, income taxes, judgment liens, or mechanics’ liens, which you will be obligated to pay after taking title to the gifted property. For more details, please consult a local real estate attorney.
THE BEST WAY TO SELECT A MORTGAGE LENDER
DEAR BOB: What is the best way to locate an honest, reliable, trustworthy mortgage lender? – Stephan V.
DEAR STEPHAN: You certainly are demanding and unreasonable. Just joking.
The best way to locate a superb mortgage lender, whether a mortgage broker, mortgage banker, or loan agent for a direct lender such as a local bank, is personal recommendations from friends, business associates or a realty agent you trust.
Don’t necessarily select a mortgage firm advertising the lowest interest rate. There probably will be many conditions attached which make obtaining that low rate virtually impossible.
Even if you don’t get a rock-bottom interest rate, compare the APR (annual percentage rate) of mortgages offered by at least three local lenders before deciding which is best for you.
The new Robert Bruss special report, “How to Become a Successful Real Estate Negotiator,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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