How Do Reverse Mortgages Work? – A New Loan Love Guide Has The Answers

Loan Love gives an overview of how reverse mortgages work in a new article.

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San Diego, CA (PRWEB) September 01, 2013

LoanLove.com is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the most recent information on mortgage lending news, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. To help expand their readers’ knowledge on a wide variety of loan types, the website recently released a reverse mortgage loan guide that answers the question: “How do reverse mortgages work?”

For most people, the only way to make use of the equity they have built up in their homes is by selling or refinancing and pulling equity out at closing. A reverse mortgage (also known by its more formal name – Home Equity Conversion Mortgage or HECM) lets people who are at least 62 years old access that equity using an entirely different approach: Homeowners can take money out of their homes without having to make any monthly payments. What’s more, the homeowner keeps the title to their home for the entire time they’re living in it.

The reverse mortgage loan guide posted on LoanLove.com explains that up until recently these types of mortgages were viewed with suspicion, since they are marketed to older home owners and critics have warned that the complexity of the loan structure makes it easy for unscrupulous lenders to take advantage of senior homeowners who may not understand the full implications of opting for this loan type. However, the article also points out that this can be said of anyone of any age, since mortgages of all types are notoriously difficult to understand without the right financial guide.

The article goes on to say: “But today, the attitude toward reverse mortgages has changed; even the Wall Street Journal notes the loans are being used – legitimately – by homeowners of all income levels who want to tap into their home’s equity without having the burden of monthly payments. As that article notes, while it used to be thought that reverse mortgages were used only by consumers facing potential financial difficulties, today’s reverse mortgages are regularly being used as tax shelters and as part of an overall investment strategy by seniors who are financially well off.”

Loan Love then gives these quick pointers for those who want to better understand reverse mortgages:

  •     “A reverse mortgage generally works like this: The homeowner gets access to their home’s equity without the need to sell their home or take out a loan that requires monthly payments; in turn, the bank gains an interest in the borrower’s home, and if the borrower moves elsewhere or dies, the bank gets that equity back through sale of the home.
  •     Like the traditional home equity model on which they’re loosely based, reverse mortgages come in a few flavors: as a lump sum, a line of credit or as a fixed monthly amount, and sometimes, as a combination of these.
  •     Most loans have no income requirements and in most cases, taking a loan will not affect your Social Security or Medicare benefits.
  •     Recently, President Obama signed a new, bipartisan bill into law that offers more protections for both lenders and borrowers. For instance, instead of just being required to participate in an informational session about the loans, today’s borrowers must have – again, free of cost – financial counseling to make sure the loan they get is the best one for their needs.”

For more information, please visit LoanLove.com for the full reverse mortgage guide.


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