Reverse Mortgages (RMs) were introduced way back in the year 1989 and has ever since seen an extreme rise in its popularity mainly due to the financial independence that it offers to senior citizens (above the age of 62). Unlike the standard mortgage system whereby the borrower has to make monthly payments to the lender, RMS work in an exact opposite manner with the lender having to pay a monthly sum or lump sum payment to the borrower. These payments are basically a part of the mortgage loan amount and can be availed for as long as the RM borrower is alive. One has to repay this loan only if the property-owner dies or decides to sell the property.
Moreover, the income generated through this source is absolutely tax-free and the process of loan approval is extremely simple, quick & hassle free as compared to other Equity Programs. Reverse Mortgages are insured by the Federal Government & are advertised for sale exclusively by FDA (Federal Housing Administration) approved financial lenders. In spite of various security features, Reverse mortgages also hold few threats and dangers that one must be completely aware of before getting involved with it:
A few complicated aspects of various reverse mortgage plans are very complex in nature; hence it may appear a bit difficult for the elder citizens to comprehend. This makes them an easy target to be cheated by unlawful sources. This is the biggest risk associated with Reverse mortgages which has even lead to innocent property-owners being forced to sell their houses for making unfair repayments.
Most Reverse mortgage programs attract customers with the promise to offer the loan amount with adjustable interest rates. RM borrowers who have minimal knowledge about this particular aspect enroll in specific programs not realizing the fact that adjustable interest rates are pretty much a gamble and current rates would only multiply in the future. Higher interest rates results in lower monthly payments offered by these agencies.
Several RM include various fee charges in addition to the original mortgage amount which adds-up to a large payable sum, thereby making it extremely difficult for many to manage repayments for closing the loan
The mortgage amount does not cover property maintenance, taxes and insurance charges, therefore there is always the potential risk of having to bear the property repair/damage expenses, if struck with a natural calamity like earthquake or flooding.
The RM borrower has to bear the potential risk of severe drops in appraisal prices with constant decline in housing prices
As an RM borrower, you may not be able to leave any family inheritance for your future generations
There are 2 sides to every coin, similarly even reverse mortgages have their plus and minus points. Based on the RM borrower's present financial condition, in addition to his/her knowledge/understanding on this topic, this financial decision could prove to be either the most suitable or the most disastrous one. HECM is the most reliable company that offers valuable Reverse Mortgages.
As compared to various equity programs, HECM is preferred not only because it is insured by the Federal Government but also because it is sold exclusively by FDA (Federal Housing Administration) approved financial lenders. You can avert most of the above mentioned threats associated with Reverse mortgages by associating with this RM agency which is trusted by maximum population of Senior citizens in the United States.