What to Know About a Reverse Mortgage
WABC TV, October 24th, 2006
These days, the Baby Boomers are
approaching retirement. Most of their parents, too, are still living.
This unprecedented population of elders has given rise to new financial
tools. One among them seems all the rage: the reverse mortgage.
Reverse
mortgages can be good tools to help retiring Americans' financial
stability. But, as with any financial service, potential borrowers need
to be careful with whom they do business and beware of scammers looking
to take advantage of unsuspecting victims. Most commonly, scammers
promoting reverse mortgages try to take a fee for providing "help" that
is available for free. Some unsavory lenders offer loans to people who
will not benefit from the reverse mortgage, simply to take their cut.
By
becoming educated consumers, people can avoid these traps and decide if
a reverse mortgage is the best course. While these loans can be
appealing (instead of making monthly payments, the bank pays you each
month), they also are complex. Key components include:
- Reverse mortgages are available to borrowers age 62 or older.
- To
qualify, you must have a significant amount of equity built up in your
home. Homeowners with little equity will not gain enough from a reverse
mortgage to make it worthwhile.
- Unlike a home equity line of
credit, there is no monthly payment on a revere mortgage. A reverse
mortgage pays you, the borrower, and is available regardless of your
current income.
- Reverse mortgages typically having closing
costs (fees) that are higher than those associated with a traditional
second mortgage or home equity line of credit.
- You must pay off any existing mortgages with the proceeds from the reverse mortgage.
- The
loan comes due when you sell the house, move out of the house or pass
away. Thus, your home will not be left free and clear to your heirs.
Heirs must repay the loan if they wish to keep the home.
Read more of this article. Learn more about Reverse Mortgages.