Warnings About Reverse Mortgages
Recent consumer protection groups and media outlets have reported about the recent trends of reverse mortgages. According to the Consumer Financial Protection Bureau, "10 percent of reverse mortgage borrowers as of February 2012 were at risk of losing their homes to foreclosure." Many experts blame the high percentage on a lack of financial discipline and adequate financial counseling and planning. When taking out a reverse mortgage, even though monthly payments are deferrred, the borrower is still responsible to be current on property taxes and home insurance.
A reverse mortgage loan offers borrowers the option of selecting a lump sum, monthly payments or a line of credit. Studies show that almost half of borrowers with a reverse mortgage in 2011 chose to take all their money upfront. The end result is if the borrower does not set aside money to pay for property taxes, the property may be foreclosed. Property taxes can range from under $1,000 to well over $8,000 a year depending on where the property is located.
How to Borrow ResponsiblyWhile there have been some negativity regarding reverse mortgages, many officials agree that a reverse mortgage does have its place in society. For instance, a reverse mortgage can actually prevent foreclosure if the homeowner is behind on their mortgage and experienced a loss of income. Whether you are researching reverse mortgages for yourself, your parents or other loved ones, please make sure the borrower understands how best to use a reverse mortgage and the responsibility to be current on property taxes and insurance. The full 4 page guide released can be downloaded here.
Contact one of our licensed reverse mortgage agents today or give us a call at 1-877-442-9658.