A reverse mortgage is a different kind of loan, an About.com retirement research columnist writes this week. While wary of products marketed on daytime TV, she writes, “these mortgages have gained some legitimacy in recent years.
While the column doesn’t have it quite right (it states that the Federal Housing Administration’s Home Equity Conversion Mortgage was created in 2010), it does align with much of the “turnaround” messaging reverse mortgages have seen in recent months and years.
If you spend any time watching daytime TV, you’ve probably heard Robert Wagner or some other “expert” touting the benefits of reverse mortgages. A reverse mortgage is a different kind of loan. If you qualify, you can tap into some of the home equity that has built up over time, providing a supplement to your income and giving you the chance to stay in your home indefinitely. In return, the lender ultimately gets the proceeds from the sale of your home once you are no longer the primary resident.
I’m wary of any financial product that is heavily sold in between ShamWow! commercials and reruns of The People’s Court. But these mortgages have gained some legitimacy in recent years. In 2010, the U.S. government has created a reverse mortgage of its own: the Home Equity Conversion Mortgage (HECM). The costs of the HECM are regulated, and you have to get counseling on the loan’s consequences and potential alternatives before you can qualify. That means you are less likely to get ripped off. But you should still arm yourself with information. Before you consider one, understand how reverse mortgages work.
Read the original post on About.com.
Written by Elizabeth Ecker