Reverse mortgage are undoubtedly mortgage types that people love to hate. However, every year the number of people taking reverse mortgages is constantly rising. In the United States alone, there are about hundreds of thousands in reverse mortgage transactions every year. The figure seems to be rising as years pass. Nowadays, it is not surprising that such loans are more demanded. The credit and financial crunch is really taking its toll.
A reverse mortgage is a type of loan offered to elder people aged 62 years and above. The mortgage works this way: the homeowner is made to agree to give up his or her home equity. The loan will be provided. The borrower will not have to worry about repayments. He or she will continuously receive monthly checks as stipulated in the agreement. The good thing is that the payment will be delivered as long as the borrower lives.
When the borrower dies, that is when reverse mortgage takes its toll. The business automatically claims ownership to the home. It will have the legal and rightful jurisdiction about how to handle the home. It may opt to keep the asset and lease it or sell the unit to get better profits. Heirs of the borrower will not get anything, unless, there is still much equity not covered by the loan. In that case, the reverse mortgage lender will have to co-own the property with the heirs.
Elders see such loans admirable. That is because they do not have to worry about how they would live for the rest of their lives. They are benefiting from the usefulness of the home now that they are still living. After all, when are they going to make use and enjoy the fruits of their labor? However, reverse mortgages are not free from scams.
The usual problem arises when a loan broker convinces an elderly to seek reverse mortgage, but on the last minute, annuity is sold instead. Annuity is less advisable on part of the borrower because it locks up the equity in home and imposes penalties for early withdrawal of funds. In comparison, reverse mortgages are designed and structured to help owners liquidate assets and not lock them. In annuity, the brokers best benefit, whereas in reverse mortgages, borrowers gain. Thus, reverse mortgages are not really sinister and bad.
To avoid troubles when applying and processing for a reverse mortgage, always be sure that you are processing a reverse mortgage. Constantly check on the broker for he or she may be processing an annuity without our full approval and knowledge. This misleading practice has been identified as the usual scam committed by brokers and agents. Do not fully trust door-to-door telemarketers and brokers for they are the usual scammers.
There is nothing wrong with reverse mortgage actually. In fact, the lender can give you money even a hundred years after your processed the loan. It is not reverse mortgage that scams elder people; it is the brokers.
Julia Vakulenko is a licensed broker associate with Tampa4U.com Realty. She has one of the hardest working Tampa Real Estate team in Florida specializing in Westchase Real Estate and also in2Va Team for Northern Virginia Real Homes.
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Published by on August 28, 2008 08:23 AM
