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The Popularity Of Reverse Mortgages Staff - Mortgage Lenders Plus.com

Reverse mortgage loans have become a mainstream financial product over the last several years. Part of the reason for this is that the FHA and HUD are doing their best to develop a framework that protects seniors who want to utilize this tool to survive. As life expectancy extends, many older Americans worry that Social Security and whatever pension they took into retirement with them will be insufficient to meet their needs. The almost universal need for supplemental Medicare insurance is indicative of the shortfall that many seniors face.

A reverse mortgage loan is simply a loan that retired individuals or couples over the age of 62 can take out using their home as collateral. The funds can be provided in a lump sum, as monthly incremental payments, or can be used as a line of credit to be drawn upon when necessary.

Ninety five percent of all reverse mortgages are insured by the FHA, while the mortgage loans themselves are provided by private lenders. Known as Home Equity Conversion Mortgages (HECMs), you can talk with a HUD reverse mortgage counselor to find a loan provider in your area.

There are a lot of scam artists operating in the reverse mortgage arena and for that reason, the federal government provides a good deal of support to people looking at the reverse mortgage loan option. For any loan provided as a HUD reverse mortgage, the agency insists that potential borrowers go through a counseling session to make sure that they understand the implications of the loan.

The terms of a reverse mortgage loan, once it is obtained, are fairly generous. The funds obtained through the loan are tax free and can be used for virtually any purpose. No payments on the loan are necessary – it is repaid when the home owner dies or when the home is sold. Obtaining the loan can be expensive, however. Origination costs may amount to between five and eight percent of the home’s value. That’s because no further cash is flowing to the home mortgage lender until the reverse mortgage loan is terminated through sale of the home.

Reverse mortgage loans are being encouraged by the FHA and in fact provided in the form of HUD reverse mortgages in part because of the increasing need among our senior population for long term care. When seniors start to lose their mobility and need a little daily assistance, if possible it is best provided at home. People without long term care insurance can afford this kind of assistance, or residence in an assisted care facility if they have the benefit of their home equity providing them with financial security.

Some consumer advocates look on these reverse mortgage loans as a risky venture. There are scenarios under which someone who has extended and expensive medical problems could end up with no equity and an exhausted insurance policy. But many seniors are reluctant to sell their homes and move to more inexpensive quarters, despite the fact that many financial advisors will say that is the wisest move. If a house has been home for forty years, sometimes the soundest financial move may not in fact be the wisest for people getting through their final years.