Reverse Mortgage Loans For Seniors Bring Access To Capital But Are They Hurting Homeowners?

Despite the fact that reverse mortgage loans for seniors are becoming more popular among homeowners, as they can offer capital to homeowners later in life, there is concern over the risk that is involved with these types of home loans. While many reverse mortgage servicers often attract homeowners by simply mentioning this type of home loan doesn’t require a homeowner to make repayments, the complexities of the reverse mortgage can be more problematic down the road if certain situations arise in the life of a homeowner.

Obviously, a reverse mortgage has benefited some homeowners due to the fact that they have been able to gain access to capital from equity in their home. Also, this coupled with the fact that homeowners were not required to make repayments on this debt has led many individuals to seek out this type of home loan opportunity, but there are problems which other homeowners have faced and led to trouble related to their home.

Homeowners who qualify for a reverse mortgage are able to access their equity, are not required to make repayments on this loan, in most cases, and a reverse mortgage is typically due after a homeowner passes away and funding from their estate or the sale of the property is used to repay this debt. However, many homeowners fail to realize that a reverse mortgage is a form of debt which will eventually be repaid and if certain conditions are not met a reverse mortgage loan may be required to be repaid by the homeowner.

As an example, homeowners must meet certain conditions before they are not required to repay on the reverse mortgage. Keeping their home as their primary residence, paying property taxes, and making sure that the home is kept in good condition are a few of the guidelines which must be met, but there are also factors like origination fees, closing costs, and interest which are to be considered.

There are many advisers who feel that a reverse mortgage should never be used and, for homeowners in a difficult financial position, selling their home and relocating to a more affordable living arrangement would be more optimal in the many cases. Understandably, homeowners who do not have to make repayments often forget that interest is building as well, which could cause the overall repayment costs to be quite high after a homeowner passes away. While, again, these funds are usually recouped through the sale of the property, this essentially means that a reverse mortgage will remove the possibility of a homeowner leaving a property to their heirs.

While there may be some counseling required for particular reverse mortgage loans, homeowners are still advised to consult a counselor who can explain the intricacies of a reverse mortgage loan, how they may affect the homeowner, and weigh alternative options for meeting the financial needs of a homeowner later in life. It’s true that some reverse mortgages have been greatly helpful to senior homeowners, but they are not for everyone and advisers feel they should not be entered into without proper understanding of what this type of home loan entails.