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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.

China Pushes Reverse Mortgages to Pay for Pensions

To support its greying society, China will promote reverse mortgages for seniors nationwide, despite four years of underwhelming trials and a vague implementation plan.

According to a Wednesday notice from the China Banking and Insurance Regulatory Commission, the country’s top financial watchdog, the reverse mortgage scheme will encourage people aged 60 or above to take out insurance policies that provide them with monthly payouts in exchange for ownership of their property after they die. The scheme was first implemented as a pilot project in cities like Beijing, Shanghai, and Guangzhou in June 2014 and has been steadily expanded since, despite poor participation.

In China, pensions rely on arrangements between companies and the government. A compulsory national policy requires that a certain amount of each worker’s salary be contributed to a pension fund, though the rules vary by region. In addition, some companies — including most state-owned enterprises — contribute an extra percentage of their earnings to pension funds. But with the ratio of workers to retirees narrowing, this system won’t be sustainable for long.

Reverse Mortgage Borrower Motives Expand as Education Spreads

Because qualifying borrowers don’t have to make monthly principal or interest payments, homeowners tend to see the products as simply an extra source of cash — whether it’s making their home wheelchair accessible, buying a home with more attractive amenities, or simply preserving more of their savings.

Originators also say that managing debt is often what drives their clients to seek out a loan. Loren Riddick, national sales manager for Fairway Independent Mortgage who has closed more than 100 Home Equity Conversion Mortgages, says that close to half of the borrowers he sees use the loan to eliminate mortgage payments and restructure debt so they can live more comfortably.

The reasons fluctuate somewhat according to demographics, originators told RMD, and the recent regulatory changes have also shifted potential borrowers’ motivations: Of those who apply for a HECM loan, fewer people qualify than in the past due to changes such as Financial Assessment, which can alter their reasons for pursuing one.

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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