Long time skeptic of the reverse mortgage program, financial columnist, Elliot Raphaelson is now changing his mind on reverse mortgages, he writes in a recent article for the Chicago Tribune.
Raphaelson has been writing about reverse mortgages for five years, but recent changes to the Home Equity Conversion Mortgage program are helping him realize how beneficial they can be for the right homeowner.
The main reason why Raphaelson is taking a second look at reverse mortgages has a large part to do with the legislation passed by the Federal Housing Administration (FHA) in 2013, he writes in the article.
Another large part he shares is that lenders are now offering much lower closing costs and more attractive line of credit options for borrowers. The newer non-borrowing spouse rules that were also put into place also played a factor in his re-assessment of the program.
Raphaelson makes the case for reverse mortgages by comparing them with a standard home equity loan.
“When a reverse mortgage borrower chooses to take the distribution of funds in the form of a line of credit, it can offer several significant advantages over a standard home await loan (HELOC),” he writes.
The main difference between a reverse mortgage and a HELOC, he points out is that the line of credit on a reverse mortgage can’t be cancelled, but there’s the risk of not being able to renew when the initial term is over when using a HELOC.
Another benefit a reverse mortgage has that a HELOC doesn’t is that the borrower doesn’t have to repay the interest and principal as long as your contract is in effect, but with a HELOC, the borrower is required to pay these fees within a given amount of time.
Above all, Raphaelson touches on the fact that with a reverse mortgage, if a borrower uses the line of credit, the line can increase over time. This is not the case with a HELOC.
Overall, Raphaelson shares that potential borrowers should do an in-depth assessment of their situation because if they want to stay in their home for a long time, a reverse mortgage could be an advantageous option.
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Written by Alana Stramowski