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Home Finance

Sorting Out Reverse Mortgage For You

in Finance
Sorting Out Reverse Mortgage For You

When the elderly individuals past 62 years of age, need to avail a loan against their accumulated equity, Reverse Mortgage can come in quite handy. It allows homeowners to borrow against their home equity as opposed to paying the lenders for a mortgage. The Reverse Mortgage puts you in a situation where you get paid by the lenders.

As per the recent research, there are a total of 11,068 Reverse Mortgages active in the state of California alone. According to the California’s Reverse Mortgage Elder Protection Act of 2009 the Reverse Mortgage must be offered with fixed as well as adjustable rate of interest. Some Reverse Mortgages such as Home Equity Conversion Mortgages (HECM) are insured by the U.S. Department of Housing and Urban Development (HUD). Ideally, one should opt for the federally insured Reverse Mortgages. However, if situation demands there are few companies that offer proprietary Reverse Mortgages with higher loan amount.

But before you consider Reverse Mortgage, you must have a clear picture.

Pros of Reverse Mortgage:

  • Whether you are aiming for early retirement or need immediate Health care, a Reverse Mortgage can come in handy.
  • One doesn’t need to provide proof of income or exceptional credit line.
  • Even if you are acquiring the mortgage on your primary residence, you will be allowed to live in your home if you like without having to pay monthly mortgage. You will also not lose your home in case of non-payment.
  • Most importantly, the money you get will be tax-free.

Cons of Reverse Mortgage:

  • As per the California law, the lenders are not allowed to make the Reverse Mortgage contingent on buying an annuity or any other services including insurance. However, if you are not well informed, you may be conned by some lenders on this front.
  • Unless you have opted to have both spouses included in the Reverse Mortgage application, in case of one spouse dies, the other may be forced to sell the home to pay off the mortgage.
  • In case of any discrepancy with your taxes or insurances, lenders may enforce the mortgage loan to come due.
  • In case you have opted for a Reverse Mortgage which is not FHA-approved, the liability to repay will be upon you beyond your mortgage property.

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