San Diego, CA (PRWEB) April 02, 2014
Reverse mortgages can be a very good loan option for those who qualify for them. However, there is a lot of misunderstanding about how they work. A recently featured reverse mortgage guide from LoanLove.com provides some insight into this home loan option for seniors. 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 latest 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. The new article continues to keep home loan borrowers up to date so that they can best plan for their home loan goals this year.
The new guide says, “Reverse mortgages can be a real boon to seniors looking for a way to tap into their home’s existing equity, but they also typically come with high fees, high interest rates and other drawbacks that may make them less than ideal for some borrowers. The primary advantage of reverse mortgages – and it’s a big one – is that seniors who’ve spent years building up the equity they have in their homes can use the reverse mortgage to draw money from their equity value without having to sell their homes. That can be a huge help to many seniors on low, fixed incomes. In essence, your home will start paying YOU.”
Loan Love explains that reverse mortgages are some of the most regulated loan products around, and are also some of the most complicated. The Federal Trade Commission has a whole section of their website dedicated to helping people to understand reverse mortgages, and those who are considering availing of this type of mortgage should definitely check this out. The guide then goes on to list some of the most common advantages and disadvantages of reverse mortgages. It first lists the primary advantages as:
- “You can receive the money in the way that suits your needs: as a lump sum, a line of credit or as a fixed monthly amount, and sometimes, as a combination of these.
- Loan proceeds usually don’t affect Medicare or Social Security benefits.
- Usually there are no income requirements.
- You keep the title to your home.
- Repayment does not begin until the borrower dies, sells the home or no longer uses the home as a primary residence.
- Some programs allow the borrower to live in a nursing home for up to 12 months before the loan comes due.
- You’ll never owe more than your home is worth, even if the amount you receive in monthly payments exceeds the actual value of your home.”
The article then lists some of the disadvantages of reverse mortgages:
- Loan proceeds may affect eligibility for Medicaid
- Closing costs and loan origination fees may be high
- Participation in a financial counseling program is required (though this is offered for free)
- Some loans have ongoing service fees throughout the life of the loan
- Most reverse mortgages have adjustable rates that are tied to short-term indexes
- Borrowers may end up having little to leave to their heirs
- The loan may come due if the borrower fails to pay taxes, maintenance costs, homeowners insurance or other expenses
Lastly the reverse mortgage guide says, “A reverse mortgage can be an attractive product for seniors who want to stay in their homes but need the equity to pay bills or increase their standard of living. But they are not without their risks and they can be difficult to understand. Take the time to learn about them and develop a list of questions you can discuss with the loan counselor. Only when you’re sure it’s a good fit for you should you sign on the dotted line.”
For more information about reverse mortgages, click here to view the full guide on LoanLove.com.