Reverse Mortgage Loan: Should You Apply for One?
The following is a guest contribution from Glennice Fryson, a member of DebtManagementTalk.com, a debt management forum that share’s its revenue with their members.
Recently, there has been an awful lot of talk about Reverse Mortgage Loans. There is also an awful lot of confusion surrounding this new mortgage-lending concept. Problem is, the confusion so far is not being diminished. The very individuals targeted are vulnerable. Swindles come and go. Unfortunately, the majority of these frauds are directed at those individuals least able to protect themselves. I have a ninety-three years young mother. I try to make sure she is protected and nothing happens to her. However, she still maintains and demands her independence. Because of this, I want to become more aware of the advantages and disadvantages to the Reverse Mortgage Loan.
Let us first look at what they are and what they can do for the senior citizen. There are three types of reverse mortgage loans available:
- The Home Equity Conversion Mortgage (HECM) – offered by the Department of Housing and Urban Development, the HECM is insured by the FHA. Right now, this type reverse mortgage is the most popular. Approximately ninety five percent of the targeted market is using the HECM.
- The Fannie Mae Home Keeper Loan – The loan limit on this type reverse mortgage is at a higher level. Therefore, borrowers can receive more money for those unplanned expenses.
- The Financial Freedom Cash Account Loan – Available to those senior citizens who own homes valued at more than $600,000. Since there is no maximum limit to these loans, the homeowners with the most expensive homes benefit from the FFCAL loan.
Before rushing into either of the three offered, take some time to consider which is more advantageous for you needs. Not everyone will need to consider a reverse mortgage loan. Generally, the reverse mortgage loan is recommended for those individuals who may require assistance on a regular basis due to long-term health issues. Or, those individuals who will need to at some point move from their home into an assisted living facility. Consider a reverse mortgage loan only if your home is the only major asset you have at your disposal in a time of need.
Closing cost on a RML can reach or exceed five percent of the total mortgage. Using the home equity over time will decrease the inheritance for your remaining family. If you are the only borrower, remember the loan will not become due as long as you are residing in the home. However, if you must move into an assisted living facility or some other residence for a year or longer, the loan becomes due. Remember, one of the main reasons some take advantage of these loans is to provide in home care when needed.
These loans do not close as quickly as others. The period between the initiation of the process and closing usually is somewhere between forty five to ninety days. Issues regarding maintenance needs and any questions based on discovered title issues will slow the process.
Before beginning the loan process to accept a reverse mortgage, do some investigation. The more you are aware of, the better. There are numerous issues to be considered. Make sure you have reviewed and are aware of all advantages and disadvantages to a reverse mortgage loan.
Most individuals purchase property as an investment with hopes of leaving something to their heirs. Tying up all equity in a reverse mortgage loan can greatly reduce the amount left to your family. There are quite a few resources available for any questions you may have and for those you may not have considered. The National Reverse Mortgage Lenders Association offers publications and a website is available. Contact this association by dialing (866) 264-4466 or at www.reversemortgage.org.
AARP offers Home Made Money: A brochure providing a detailed overview of the reverse mortgage with a calculator. Contact the AARP by calling (800) 424-3410 or at www.aarp.org.
The Financing Long Term Care is a website established to provide facts, education and recommendations your family may need to consider. Review their information and recommendations at www.financinglongtermcare.umn.edu.
In addition, for free programs to help seniors identify public assistance available and where this information can be obtained, the Benefits Checkup Website is available at www.benefitscheckup.org.
Please remember, educated consumers are an awesome force. When provided with the resources necessary, you are guaranteed your money will work for you and your family will reap the rewards as planned.
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