"It's easy to think [a reverse mortgage] can be the answer to your prayers," said Danielle Laura of the Wayne Metro Community Action Agency. "My advice would be that a little healthy skepticism never hurt anyone."
Reverse mortgages allow homeowners over age 62 to borrow money against the market value of their home based on an appraisal conducted by the lender. The attraction is that elderly borrowers with homes can stay put while increasing their cash on hand to help with expenses. No loan payments are required while they remain in the home.
The borrower, however, does not always understand the terms of the loan, and some unscrupulous lenders do not clearly communicate the loan requirements. There are many instances where the lender alleges to not have received the proper paperwork or notifications from borrowers – despite claims to the contrary from the other side – and sends the property into foreclosure.
And while reverse mortgage loans are federally insured, the government will not make up the difference between what is owed on the mortgage and what is recouped from the sale of a home unless the home has gone into foreclosure.
If a reverse mortgage sounds like a good option for you or a family member, take the time to find a lender with a good reputation (that does not foreclose quickly) and a reputable financial counselor who can help determine the best solution for the homeowner. Also, be sure to pay attention to all of the requirements of the loan, stay on top of paying property taxes and insurance (these are not escrowed like many regular mortgages), and provide timely proof that the homeowner continues to reside in the home.
Have questions or concerns about a reverse mortgage? Give us a call at (248) 477-6300.