Consumer Safeguards
Reverse mortgages are getting popular day-by-dy among retirees. A great number of seniors seniors are disappointed at not having sufficient funds for their retirement. An easy way to top up their lifestyle may be to tap into their family home. A reverse mortgage can be a great way to receive additional retirement income that is much needed in today's society. But there are several factors that come into play when you apply for and receive a reverse mortgage. Before you jump into this advantageous program, make sure that you have all of the reverse mortgage information that you need to know.
Reverse Mortgage loans are designed by the U.S. Department of Housing and Urban Development (HUD). Most of the Reverse Mortgage loans made today are insured by the Federal Housing Administration (FHA); a government supported mortgage insurance program. HECM is considered as the safest and most used type of reverse mortgage. Here are some of its important consumer safeguard features:
Standard & Capped Interest Rates...
You can choose either a fixed interest rate or a rate that adjusts monthly or annually (the borrower chooses). Rates are calculated on one of two indexes--the 1-year U.S. Treasury Constant Maturity Rate published weekly by the Federal Reserve, or the London Interbank Offered Rate (LIBOR)--plus a margin charged by the lender. Both the monthly and annually adjusted rates have lifetime caps.
Limitation on Fees...
Origination fees are limited by HUD regulations and may be financed as part of the reverse mortgage. This means a senior incurs very little out-of-pocket expense to get a reverse mortgage.
Advance Disclosure...
The lender has the obligation to present the borrower the total payment plantover the life of the loan. That way, the senior will know exactly the costs of the reverse mortgage.
Independent Counseling...
Before you can complete your reverse mortgage application, you must first receive counseling by an independent HUD counselor. This step, required by law, is designed to protect you.
No Maturity Date...
A reverse mortgage cannot become due during the homeowner's lifetime. You can't be forced to pay the mortgage until you sell it or move.
No Prepayment Penalty...
You are not obligated to pay the loan early but, if you want to, you can do it without having to pay any additional fees.
Here are some links for more information on reverse mortgages:
- The Department of Housing and Urban Development (www.hud.gov)
- The Fannie Mae Foundation (www.fanniemae.com)
- A. A. R. P. (www.aarp.com)
- National Reverse Mortgage Lenders Association (www.nrmla.com)
