Reverse mortgages used to have a much deserved terrible reputation. Today, however, they are much better and have become a viable option for many people.
Many elderly people find themselves in need of money to meet unexpected expenses. Sometimes, they just did not anticipate how much they would need to live on in retirement.
While some are able to get a standard loan, that is not an option for many people. Why? It is because they cannot afford to make payments every month.
To solve this problem, reverse mortgages were created.
Elder law attorneys almost universally have derided reverse mortgages. They were seen as nothing more than ways to rip off the elderly.
However, the laws have changed and reverse mortgages are not as bad as they used to be, as Inforum points out in “Changes in reverse mortgages make them safer, less expensive.”
A reverse mortgage allows an elderly person to use the equity they have built up in their home. The borrower can get money now as a line of credit, regular payments or even a lump sum. The money does not have to be paid back, until the borrower moves out of the house permanently, sells the house or passes away. The lender is paid back the money loaned plus interest by selling the house. If there is anything left after the lender is made whole, the remainder goes to the borrower or his heirs.
Legal protections make these loans better than they used to be, including provisions that borrowers must receive counseling by an approved provider before signing a reverse mortgage.
Nevertheless, the contracts are complex. It is, therefore, best to see an elder law attorney before signing a reverse mortgage.
Reference: Inforum (Feb. 27, 2017) “Changes in reverse mortgages make them safer, less expensive.”