The Right Information Can Make Reverse Mortgages Simple
By: Fabiola Grosshan
Submitted: 2010-06-03 06:26:25 | Word Count: 406
Entering into an agreement for a reverse mortgage makes sense at any time. The interest rate for a reverse mortgage should always be fixed. The rules about reverse mortgages are written in stone and have remained the same for the last 20 years.
All of the previous statements are in some way false, but each represents a common flaw among perceptions about reverse mortgages. These misperceptions grow from the lack of accurate information about reverse mortgage facts.
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As Americans have witnessed the collapse of the housing market, we have also witnessed a significant number of changes to lending rules around new and existing homes, like the HAP or the Home Affordability Program. The reality for seniors is that new ideas and new rules and regulations make the reverse mortgage news on a regular basis. A surprising change in the last few years has been the reverse mortgage lending limits, which changed from about $360,000 to over $600,000. These new rules make it possible for seniors to lend out more because the homes that they own have appreciated considerably over the last 20 years. After consideration by the FHA, the rules were modified.
Interest rates are another important point for seniors to consider before entering into a reverse mortgage. Regardless of the interest rates, seniors who qualify can take out a reverse mortgage and are not required to pay the money back until they leave the home or pass away. The bank then settles the amount of the loan against the home. However, seniors who do not need the cash right away should consider an adjustable rate over a fixed rate. A fixed rate will require the senior to take the cash right away, where an adjustable rate can be drawn out and even paid back, so the senior turns the loan into a line of equity to use for projects, vacations, health expenses or just for fun.
The best advice before entering into a reverse mortgage is to get free reverse mortgage counseling. Don’t attend the counseling just once; if the reverse mortgage isn’t right today, it may be a good idea in a year or two, and rules will change, so it’s important to stay up on the latest reverse mortgage news.
