You might have been listening a lot about reverse mortgages these days and might be curious how does a reverse mortgage work, what they’re and if you should get one.
Although there are three types of reverse mortgages there are only two that are normally referred to. The most common reverse mortgage is officially called a Home Equity Conversion Mortgage (HECM). This type is supported by the federal government’s Department of Housing and Urban Development (HUD). The other type is called a proprietary reverse mortgage and is supported by private companies and not federally insured.
A reverse mortgage is only a high cost loan, but no one appears to tell us that. The upfront costs can be real high. This makes it even more expensive if you live in your house for a short period. This type of reverse mortgage is easy to get if you qualify by age and have decent equity.
There’s so much television advertising for reverse mortgages right now and they make it all sound so good and the way to go but they don’t say you about the high fees that go along with these loans. The federal government’s Consumer Law Center reports that a $250,000 loan might cost you $25,000 in fees.
There are many scams out there and scrupulous mortgage brokers. So even if you decided you prefer to pay the high fees and get a reverse mortgage it would be hard to know who to go with.
For a HECM you can select a fixed monthly cash advance for a particular time for as long as you live in your house. The other alternative is getting a line of credit, so you can draw on the loan amount at any time or you can acquire a combination of the two.
So if you decide you need a reverse mortgage these are some of the things you lack to know. Make sure the mortgage agent is reputable – check with your local better business bureau. Make sure you know precisely how much the loan is going to cost you in fees and find out ALL the limitations, there are many.
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