Taking out a reverse mortgage without fully understanding the product can lead to long term regrets, The Buffalo News writes.
The outlet responds to readers’ concerns about reverse mortgages, specifically the the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program, in a recent article.
Some readers expressed confusion about how the product works and the mandated steps one must take to obtain a reverse mortgage.
“Counseling is not recommended, it’s required by the Department of Housing and Urban Development. Borrowers have to use HUD-approved housing counselors, who must discuss not just how a reverse mortgage works and its eligibility requirements but the financial implications of getting this type of loan.,” The Buffalo News says. “Their job is to help guide people to make their own decisions about whether the product is right for them.”
The article also discusses the difference between a home equity line of credit and a reverse mortgage, noting that the problem with a line of credit for cash-strapped seniors is that they may not qualify for the loan and they have to make monthly payments.
“The appeal of a reverse mortgage is that no monthly payment is required,” The Buffalo News says.
Couples wherein one spouse is younger also need to understand how a reverse mortgage will impact him or her if the older spouse dies before the younger spouse.
“More commonly, the younger spouses are talked into quit-claiming their interest in the home by mortgage brokers to generate higher draw on equity,” Jean Constantine-Davis, senior attorney with AARP Foundation Litigation, tells The Buffalo News. “The couples virtually never understand that under the terms of the mortgage, when the borrowing spouse dies, the surviving spouse will be foreclosed on and evicted.”
Read the article here.
Written by Cassandra Dowell