Thursday, February 7, 2013

When Social Security Fails-Reverse Home Mortgages

The future of Social Security Insurance benefits in the country is not looking so well. New tax increases have saved the program for now, but many are wondering how much longer the program will hold up. The problem with the depletion of SSI is that many Americans have not prepared properly for retirement and aging generations are facing the real risk of never receiving Social Security – that’s why many are seeking alternative options. Reverse mortgage loans offers seniors a way to pursue financial security through the equity in their home. Learn about reverse home mortgages to determine if these programs are the best option for you.

What is a Reverse Mortgage?
A reverse mortgage is also known as a lifetime mortgage and is specifically made for senior citizens. This type of a loan is an equity release for people who are home owners or home buyers and are 62 years of age or older. Reverse mortgage programs offer the home owner/buyer a way to access the equity in their home and use it for monetary funds. This financial option is commonly used to supplement retirement income, pay off a current mortgage loan, and cover medical bills. The basic utility of this mortgage program is to offer seniors a way to get extra funds without having to sell their home or take our personal loans. Most reverse mortgage loan plans do not have income caps and are usually tax free.

Types of Reverse Mortgages
Making a decision about a reverse mortgage loan will require that you understand the different types of reverse mortgages available to senior citizens. Below are the three types of reverse mortgage loan programs.

Single Purpose Reverse Mortgages
A single purpose reverse mortgage is offered by some state and local government agencies and nonprofit organizations and offer the least expansive options to borrowers. This type of loan comes with the contention that the borrower uses the funds for a specific reason such as a home repair or payment of a medical bill. The single purpose reverse mortgage loan is the easiest to qualify for.

Home Equity Conversion Mortgages (HECMs)
These loans are federally insured and are backed by the U. S. Department of Housing and Urban Development (HUD). A HECM has no income requirement and can be used for any purpose. This loan comes with the contingency that the borrow meets with an independent government approved housing counselor before applying. The upfront cost of HECMs can be very high and might not be the best option for someone who is borrowing small amounts or plans to sell their home soon.

Proprietary Reverse Mortgages
A proprietary reverse mortgage loan is a type of private reverse mortgage loan that is backed by the company that offers them. Like the HECM, proprietary reverse mortgage loans can also carry expensive fees to establish.
For a full explanation about these three types of reverse mortgage loans, visit the Federal Trade Commission’s website for consumer information.

Borrower Beware!                                             
Never agree to any financial agreement that you don’t understand. If the lender is trying to sell you on other products and you are not sure if they serve a purpose in your reverse mortgage loan, it may be time to walk away from doing business with the financial institution.

Is an RHM something that you would consider?

Article written on behalf of  Land, Parker & Welch, P.A.- lawyers helping South Carolinians who need help with workers’ compensation or Social Security Disability claims.

SimplyLili is a PhD student in Social Psychology and an avid blogger. Her main goal is to bring awareness to issues that warrant social responsibility and action. She is a self-proclaimed nerd and her 3 fave things are cheesecake, rainy days, and pugs.


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