Reverse mortgages are complex financial products that can be easily misunderstood by consumers and others who are not particularly well-versed in their technicalities. In efforts to clear the air of some of the complexities, a recent article from The Motley Fool tells retirees what they need to know when considering reverse mortgage loans.
The article includes several basic truths of reverse mortgages, namely how the loans generally work, the different ways a borrower can elect to receive payment, along with the significance of Federal Housing Administration-insured reverse mortgages.
Shifting to the more technical side, the article goes on to explore the costs of a reverse mortgage, including initial mortgage insurance premium fees and insurance costs associated with the loans that borrowers are required to uphold. The article also illustrates the range of costs borrowers can expect to pay in origination and monthly servicing fees.
Last but not least, the issue of the non-borrowing spouse comes into play, dubbed in the article as the surprise “gotcha” with reverse mortgages.
While some couples may elect to list just one homeowner on the reverse mortgage, the strategy can backfire if the named borrower develops a medical condition that puts them out of the residences for an extended period of time.
The article, however, fails to indicate the recent HECM change that went into effect last August that protects non-borrowing spouses from having to vacate their home in the even that their borrowing spouse dies.
Read more at The Motley Fool.
Written by Jason Oliva