For years, reverse mortgages have been the root of many controversial debates. Primarily, this is due to the fact that so many misconceptions about them. The easiest way to clear up these misconstrued ideas can all be solved by asking a few simple questions.
What is a reverse mortgage?
Bankrate.com defines reverse mortgage, as a home equity loan for older borrowers in order to put more equity and value into a home. Sometimes it is referred to as Home Equity Conversion Mortgage or HECM for short. The purpose of the loan is to build value into a home as well as help out with any expenses as needed.
Why are people so apprehensive about them?
Many things have been said about reverse mortgages that are not necessarily in the most encouraging light. The criticisms that have been associated with reverse loans from a variety of reasons, including the accusation of borrowers being mislead by HECM advertisements. Anytime there is an inkling of mistrust surrounding a product, there will surely be tons of skepticism about it as well. That skepticism definitely becomes amplified anytime financial decisions are being made.
Who can get a reverse mortgage?
Reverse mortgages are aimed toward older adults whom are either approaching retirement or already in it. The eligible age for receiving a HECM is 62 or older, which is usually the time that most people retire. Unlike a home loan, reverse mortgage lenders do not look at a credit score but rather your history and how you pay your bills.
When should I begin thinking about reverse mortgage?
Seeing that reverse mortgages are used by older home owners, you may want to think about them when you are nearing retirement. As your main source of income begins to come to a close, you should assess the state of your finances. You can start by investigating any debts that you may have accrued over the latter part of your working years (i.e. new car, co-signing on kids’ student loans, etc.).
A reverse mortgage is not as sought after as one that is conventional or used to buy a home. A survey conducted by the U.S. Department of Health and Human Services says adults can expect to live an additional 19 years when they turn 65. As medical technology gets better and improves the quality of life, many older citizens could possibly seek out HECM loans in an effort to enjoy some financial stability in their twilight years.