Reverse mortgages are becoming and more common among people who still own their homes. These mortgages can be a great way to address the social problem of struggling low-income seniors by providing them money through converting part of their home equity into money for other expenses. In other words, it allows their long-term investment into their home to be a source of income.
Reverse Mortgage Lenders and Their Products
Lenders Of Reverse Mortgages are qualified professionals who are legally able to sell reverse mortgages. There are three different types of mortgages on the market that a lender could sell you:
Single-Purpose Reverse Mortgages are the lesser expensive of the three, but they are not available everywhere. The loan can only be used for one purpose that is specified by the lender, such as property taxes, home improvements or repairs. Homeowners with a low to moderate income may be eligible for these loans.
Proprietary Reverse Mortgages are loans that are private, and offered by companies that developed them. For a home of higher value, you could get a larger loan in advance from this type of mortgage. In other words, if you have a small mortgage and a home with an appraisal value that is higher, you may qualify for more money.
Home Equity Conversion Mortgages, which are known as HECMs, are insured federally and are regulated by HUD. These loans are usable in any situation or for any reason.
Protocol
Lenders must conduct a financial assessment on you. This will help them decide whether to approve or close your loan. In this assessment, they evaluate your ability and willingness to meet your mortgage requirements and other obligations, such as property taxes. Based on the results of this assessment, the lender could then allocate part of your approved funds to specific expenses like flood insurance. These “set-asides” would be deducted from the loan amount that you would receive in loan proceeds.
If you are applying for either the proprietary reverse mortgage or HECM, you have to consult with a counselor from a housing counseling agency that is independent and government-approved. This counselor will discuss the loan’s financial implications and costs, as well as explain alternative options to these types of mortgages.
Cautions
Be cautious of salespeople and companies pushing “too good to be true” claims. If a salesperson believes that a reverse mortgage is a solution to all of your problems, has an idea of how you should spend the money from a reverse mortgage loan, or pushes you to take the loan, you likely shouldn’t trust them. Some salespeople may also try to rush you through the process and make an impulsive. In any of these situations, check with a counselor or someone you trust before proceeding with these types of salespeople.
