... it is important that homeowners don’t get caught up in the reverse mortgage hype, or get drawn-in by gimmicks or free giveaways that some reverse mortgage lenders are offering to attract customers.
Chicago, Illinois (PRWEB) June 30, 2014
Judging by the number of seemingly endless TV commercials with the likes of young-looking senior citizen actors like Henry Winkler and Fred Thompson touting the virtues of various reverse mortgages plans, the popularity of reverse mortgages is definitely on the rise. Before jumping on the reverse mortgage bandwagon, Chicago bankruptcy lawyer and financial rescue expert and managing partner of the Fonfrias Law Group LLC (http://www.chicagomoneylawyer.com) Richard G. Fonfrias, J.D. advises seniors to explore other viable alternatives for freeing up money and increasing income first as a reverse mortgage loan may not be the best way to obtain cash.
“Reverse mortgages look like a reasonable way to increase your income while you remain in your home. In fact, only a few years ago, no one had ever heard of a reverse mortgage. But now they’re all the rage. That does not mean they are problem-free. Reverse mortgages can be costly and an elderly homeowner may see only 30 to 80 percent of the value of their home through a reverse mortgage. They also face closing costs and service fees. And, some reverse mortgages carry fixed interest rates while others are adjustable. It is important for anyone interested in a reverse mortgage to understand the rules and proceed with caution,” explains Fonfrias.
Other key characteristics of reverse mortgages that should be taken into account before deciding whether a reverse mortgage loan is the way to go:
- Reverse mortgages come in a wide variety of options, shapes and sizes. A reverse mortgage that is right for one homeowner may be disastrous for another.
- Reverse mortgage loans must be repaid, either in cash or by transferring the deed to the home when the homeowner dies, moves away or sells the home.
- The homeowner is still responsible for all taxes, insurance, maintenance and repair
- The homeowner can never owe the lender more than the home’s value at the time the loan is repaid.
“How do lenders and investors approach reverse mortgages? When lenders see an elderly couple with equity in their home, they start salivating. They want that equity for themselves; especially if the home is in an area where its value is expected to climb. Simply put, when a lender arranges for a homeowner to get a reverse mortgage, the homeowner gets to remain in their home with the title still in their name until they pass away, but when that homeowner dies, the lender gets to keep the home and sell it for a profit,” explains Fonfrias.
Richard Fonfrias suggests the following alternatives should be considered before taking out a reverse mortgage:
- Home Refinancing: With interest rates low, home refinancing is a good option. Payments can be made using social security, pension or IRA withdrawals, if necessary. The cost is likely less than selling a home and renting another home or apartment. Best of all, the homeowner keeps the equity in their home to be used at a later date should they sell to downsize or move into an assisted living facility.
- Home Equity Line of Credit: Setting up a home equity line of credit (HELOC) is a good idea even if the money is not needed right away. A HELOC allows the homeowner to draw down the equity in their home as they need the cash or in case of an emergency.
- Sell Home and Move Into Something Smaller: Selling and moving into a less expensive living unit accomplished a few things. The homeowner lowers their living expenses and equity from the sale of their home can be placed into investment vehicles that pay dividends and have growth potential.
“In conclusion, it is important that homeowners don’t get caught up in the reverse mortgage hype, or get drawn-in by gimmicks or free giveaways that some reverse mortgage lenders are offering to attract customers. If the lender is giving stuff away free; one can bet that it’s to distract consumers from the other ways that they are getting their hands on their equity. Before signing anything, it is always best to consult with an attorney well versed in financial matters. A lawyer can thoroughly explain all possible options that are available and find the best solution to free up cash, taking into account the homeowner’s own unique circumstances and requirements,” advises Fonfrias.
Richard G. Fonfrias, J.D.
Fonfrias Law Group, LLC
First National Plaza
70 West Madison, Suite 1400
Chicago IL 60602
About Fonfrias Law Group: Chicago Money Lawyer Richard Fonfrias of the Fonfrias Law Group has built a solid reputation helping clients in serious financial trouble to find the right solution to their money problems. The Fonfrias Law Group’s dedicated financial rescue and bankruptcy team offers an extensive range of financial and legal services, including bankruptcy defense, tax defense, debt consolidation, bad credit repair, foreclosure defense, credit card debt management, loan and mortgage refinancing advice. For more information or to arrange a free initial consultation with Richard, please call 312-969-0730 or visit http://www.chicagomoneylawyer.com.