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Reverse Mortgage Tips

Vera Gibbons spoke with Julie Chen about when is a good time for a reverse mortgage and what to look out for.

Are Reverse Mortgages Worth the Risk?

Do you plan on leaving the home to anyone after you die?

When you take out a reverse mortgage, you don't have to pay anything back for as long as you're living primarily in the home and you can keep up with the property taxes, insurance, and other required costs. If you decide to move somewhere else for your retirement, or if you move to an assisted-living facility, the balance comes due, even if you don't sell the home at that time. If you remain in the home for the rest of your life, the balance must be paid upon your death.

Your heirs still can take possession of the house, but they must either pay off the balance of the reverse mortgage loan or qualify for a traditional mortgage on the home instead. If they don't want to keep your home themselves, they can always sell it and put the proceeds toward the loan. If they're unable to do so, the bank will sell the home. If the house sells for more than the balance of the loan, your heirs will inherit the difference. If it sells for less than what you owe, your mortgage insurance will cover it.

Ratings agency forecasts proprietary reverse mortgage boom

Here’s what the ratings agency said interested parties should know:

1. RM lenders are offering more product options, including forward mortgages.

Many HECM originators are expanding into proprietary reverse mortgages, even exploring traditional forward mortgage products, KBRA writes. The agency calls this “product agnostic” trend a healthy development, because it could decrease the risk that a HECM-only originator would sell a reverse mortgage to an unsuitable borrower.

KBRA also points out that disclosures for proprietary products and financial counseling that mirrors FHA’s HECM counseling further improve the landscape. “KBRA believes that these enhancements may result in better suitability for some borrowers, which should ultimately translate to fewer defaults and/or early voluntary repayments.”

2. Borrower credit and capacity matter

Data from crisis-era proprietary RM vintages regarding loss severities, liquidation timelines, mortality and morbidity-based repayments may not show the whole picture, the report states. The current proprietary landscape mirrors FHA’s credit requirements to curtail T&I default.

if i apply for reverse mortgage do i need equity on my property?

Yes,, you need 40% and can borrow up to 80% of the value (total liens).

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