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Understanding Reverse Mortgages

By Hilary Gibson, Staff Writer

(Page 5 of 6)  

No Penalty for Canceling the Loan: After the loan closes, a senior has up to three days to cancel the transaction, the so-called “right of rescission,” for any reason whatsoever.

Asset Protection: The HECM is a “non-recourse” loan. This means that the amount due can never exceed what the home is worth. Title to the home always remains with the borrower.

No Shared Appreciation: No reverse mortgage product in the marketplace has “equity-sharing” or “shared appreciation” features. In some earlier reverse mortgage products, the senior could obtain more money in exchange for giving up a percentage of the future value of the home. Such products are no longer offered.

Making the Decision

It’s highly advisable that seniors considering a reverse mortgage should share this information with family members so the loan won’t be a “surprise” when dealing with inheritance issues. Joel Sanders, Marketing Director/Loan Officer with United Northern Mortgage Bankers, Ltd., also handles the reverse mortgage program for seniors at his firm. He, like Mr. Bell, wants not only seniors, but their family members to become educated consumers. Mr. Sanders’ shares the following:

Family members generally support a senior’s decision to seek a reverse mortgage, especially upon being educated on the facts. Specifically, that equity will remain to inherit since only a fraction is being tapped; accrued interest will likely be offset and home equity preserved since, over the long haul, the home will likely appreciate in value; and a reverse mortgage allows seniors to live independently without need for help from their children or
risk of foreclosure.

Payment Options

Once you’ve decided what kind of reverse mortgage to go with, there are three payment options to choose from to receive your loan:

  • in a single, lump-sum of cash

 

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