Reverse Mortgages Rising But Not Sharply Enough
Reverse mortgages among aged Americans seems to be rising steadily, but the increases are not sharp enough to generate significant visibility. As you may know, a reverse mortgage allows an older American to borrow against his or her home property while still living in it. Seniors are typically in their 70s when taking out reverse mortgages.
The economic recession has spurred more senior Americans to go in for reverse mortgages. But reverse mortgages are still small in number when compared to the traditional mortgages.
The FHA (Federal Housing Administration) seems to have insured 112,014 reverse mortgages in 2008, for the period that ended Sep. 30. This is up from a figure of 107,368 in 2007.
Lonely widows and widowers among American seniors are looking more and more to take reverse mortgages on their homes. Bank of America has said that reverse mortgages have gone up 50% since October 2008.
In November 2008, the FHA raised the reverse mortgage limit to $417,000 and capped the fees. This was a welcome move benefiting many seniors looking to take reverse mortgages. Seems this has allowed more seniors to opt for reverse mortgaging their homes.
David Certner is the legislative policy director for the AARP (American Association of Retired Persons) and he has said that on a $300,000 loan, borrowers’ costs would be $15,000 at closing and another $15,000 during the life of the loan.
More than 40% of the takers for reverse mortgages are single or widowed women, according to FHA data.
Meg Burns of the FHA cautioned against seniors borrowing money through reverse mortgages, and then using the money for making other investments.
For the FHA to insure a reverse mortgage, third-party counseling is a necessity. Some banks also insist upon insuring reverse mortgages. But counseling may not be required for all cases of reverse mortgages.
Sometimes taking home equity loans can be a better option, when compared to taking reverse mortgages. This is why a senior in need of money needs expert advice to choose the best option available to him or her, rather than blindly choosing reverse mortgages.
As always, an expert can help decide if a senior should go for a reverse mortgage.
