Bankrate published an article earlier this week about the Housing and Economic Recovery Act and what it means for reverse mortgages. In New rules rev up reverse mortgages, journalist Dana Dratch writes that the housing law has raised the ceiling on the amount of money seniors can obtain from a reverse mortgage and lowered the fees charged for the loan.
The new law also allows retirees to purchase a home and take out a reverse mortgage in one transaction. The HECM for purchase is meant to help retirees who want to get into a property that “better suits” their needs, says Darrly Hicks, vice president of communications for the National Reverse Mortgage Lenders Association. "The intention of the program is to create a greater sense of flexibility," Hicks says.
The article also encourages people to analyze a reverse mortgage the same way you would any financial move that involves the roof over your head: carefully. "It can be a good thing for an older retiree who is house-rich and cash-poor," says Eric Tyson, author of "Personal Finance for Dummies."
And that seems to be exactly who is using them, according to Bronwyn Belling, reverse mortgage specialist for the AARP Foundation. "Your typical borrower is a 73- or 74-year-old who has lived in the home a long time, seen a lot of appreciation but is having trouble making ends meet," Belling says. However, reverse mortgages are not the automatic answer for everyone. "These loans work very well for some people and not so well for others," she says.
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