Whether you, your parents or grandparents are considering a reverse mortgage, we’ll help you define what it is and how it works so you can see for yourself how reverse mortgages are a predatory product to avoid. In fact, over 100,000 reverse mortgages have failed, resulting in foreclosures and evictions! 1 If you decide to apply for a reverse mortgage, you can contact an FHA-approved lender.A reverse mortgage might sound appealing if you think of it as letting your house pay you a monthly dream retirement income!īut are they really that great? No, they’re actually major rip-offs. If you think a reverse mortgage might be right for you, find an HECM counselor or call 80 toll-free to learn more about this financing option. HECMs come with stringent borrowing guidelines and a loan limit. Nearly all reverse mortgages are issued as home equity conversion mortgages (HECMs), which are insured by the Federal Housing Administration. The Consumer Financial Protection Bureau recommends waiting until you’re older to obtain a reverse mortgage so you don’t run out of money too early into retirement. You continue paying all property taxes, homeowners insurance and other household maintenance fees as long as you live in the homeīefore issuing a reverse mortgage, a lender will check your credit history, verify your monthly income versus your monthly financial obligations and order an appraisal on your home.Your home meets all FHA property standards and flood requirements.You attend the mandatory counseling session with a home equity conversion mortgages (HECM) counselor approved by the Department of Housing and Urban Development.You own your home outright or have a considerable amount of equity in it.You and/or an eligible spouse - who must be named as such on the loan even if he or she is not a co-borrower - live in the home as your primary residence.To apply for a reverse mortgage, you must meet the following FHA requirements: Modified term: A line of credit and set monthly payments for a fixed period of your choosing.Modified tenure: A line of credit and set monthly payments for as long as you or your eligible spouse live in the home.Line of credit: Unspecified payments when you need them, until you’ve exhausted your funds.Term: Set monthly payments for a fixed period.Tenure: Set monthly payments so long as you or your eligible spouse remain in the home. Fixed-rate reverse mortgages consist of a one-time lump sum payment.Ģ.The Federal Housing Administration insures two reverse mortgage types: adjustable-rate and a fixed-rate. » MORE: How to get a reverse mortgage Two kinds of reverse mortgages The older you are, the more home equity you can pull out. The sum you receive in a reverse mortgage is based on a sliding scale of life expectancy. You still have to pay property taxes, homeowners insurance and other related costs, or you could risk foreclosure. You could lose your home if you don't pay property taxes and insuranceĪ reverse mortgage is the opposite of a traditional home loan instead of paying a lender a monthly payment each month, the lender pays you. The loan reduces your equity in your homeĪn eligible surviving spouse can stay in the home
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