Expert Contributor
Reverse Mortgages..
Good or Bad?
By Steve Cline, Preferred Financial
R
everse mortgages have been around for over 60 years and have long been the subject of much criticism and controversy. From the early 60’s to the early 80’s, these mortgages were made available through a few Savings & Loan Associations and some “rogue” lenders. There was zero standardization of the product, allowing lenders to create their own terms and conditions, most of which favored themselves at the expense of the borrowers. The government got involved in 1983 when the Senate gave approval to have reverse mortgages insured by the Federal Housing Administration (FHA). The first few FHA-insured Home Equity Conversion Mortgages (HECM, commonly referred to as Reverse Mortgages) were issued by 1990. Since then, the government has orchestrated a variety of changes and embellishments to the product, resulting in what is today a very valuable financial planning tool for our aging population. Nowadays, more lenders are offering the government-insured HECM more competitively than ever. Some current features include:
• • • •
cash out as a lump sum at settlement as an annuity, with regular cash payments as a line of credit, similar to a HELOC a combination of any of the above
The reverse mortgage is a very complicated mortgage product and is certainly not appropriate for everyone. Careful consideration is paramount in deciding if it is a good or bad loan for individuals. If you would like more information, feel free to contact me here at Preferred Financial where “we listen, we educate, and then perform like no one else in the industry.”
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