When used with wisdom, reverse mortgages are beneficial to retired elderly adults. Instead of having to sell one’s coveted home, the reverse mortgages enables seniors to take out money based on the equity they have put into their homes. It is important to understand the criteria and expectations that come with these complicated loans. Retired adults 62 and over, could end up in a bind if they use the loan improperly.
A common mistake to avoid is assuming a regular mortgage loan for a reverse mortgage loan. As mentioned earlier, reverse mortgages are complicated loans that require counseling and vast knowledge of the process as well as one’s requirements as a home owner. For instance, in past mishaps, elders have taken all of the equity out of their home, use up all of the cash the acquire, and then find themselves unable to afford the property maintenance and taxed that they are still required to pay.
On the bright side of things, the federal government is tightening the guidelines to stop borrowers from digging themselves into trouble. There are new limitations and changes to the loan process which are all positive. From now on borrowers are only able to take 60% of the available equity in their home to avoid ending up in a hole after the first year. Once, the borrower gets a better grip on how to manage their finances they can tap into the remaining equity when the first year has concluded. Lenders are also being pushed to evaluate the financial stability of the client to assess if they can meet their financially obligations. It is even becoming normal for lenders to require the borrower put money aside to ensure they can cover their property taxes and maintenance costs.
The most important thing to consider with reverse mortgages is that they are a loan. As with any loan, there comes a set of rules and obligations that the borrower must follow. If the borrower is careless and avoids these obligations it can lead to debt and even foreclosure. The new regulations will help weed out the insufficient borrowers. No one wants to take out a loan in expectation of a better life and consequently that dream turns into a complete nightmare. Financial advisers, accountants, and estate planning attorneys are all becoming popular ‘go-to’ people for elders considering a reverse mortgage.
When pondering a reverse mortgage, taking the time to understand the process and duties as the borrower cannot be stressed enough. To summarize, a reverse mortgage is a great option for financially stable, retired elders, 62 and older.