Reverse Mortgage Pros and Cons

Reverse Mortgages have been particularly beneficial to people whose retirement savings and investments have shrunk due to the recent downturn in the U.S. economy. This can place them at risk for losing their homes because they have less available retirement earnings with which to pay their monthly mortgages. For individuals looking for a more flexible home mortgage plan, a look at reverse mortgage pros and cons is a good idea.

There are some new safeguards in place that make reverse mortgages more attractive than ever before. New rules include more flexible eligibility requirements, fee limitations, insurance options and better counseling requirement for non-FHA-backed reverse mortgages. These new safeguards are intended to thwart conflicts of interest and to increase awareness for potential participants. They are also geared toward protecting particular homeowners. For example, new policies prohibit reverse mortgage lenders from obtaining a reverse mortgage for the purpose of investing in products or services offered by the same lender. The new rules further prohibit the lender from receiving referral fees or benefits from other investment entities selling products or services that are meant to be financed with the money received from the reverse mortgage proceeds.

Reverse mortgage pros and cons often center on the issue of suitability. What might be good for one homeowner might not be suitable for another. For example, if the participant does not intend to live in the home over the long-term, or if the disbursements are not sufficient to cover the homeowner's needs, these would represent an unsuitable situation for the homeowner. Other unsuitable situations include if the homeowner wishes to use the proceeds to buy annuities or other investments that would be inappropriate, or if a parent wanted to use the equity to lend money to children.

(1) Misunderstandings due to the erroneous belief that reverse mortgage loans come without any consumer protection.

(2) Misperceptions due to the mistaken belief that lenders normally take over the home after the homeowner dies, or that homeowners might outlive the money they receive every month resulting in them owing more than the property is worth.

(3) Mischaracterization due to the loans being put in the same categories as subprime mortgages or predatory loans. None of these misconceptions are true, but when reviewing reverse mortgage pros and cons, the consumer will do well to contact his local state regulatory body to find out exactly what that facts are before engaging in a reverse mortgage.

Also See: Disadvantages of a Reverse Mortgage

Reverse Mortgage Help:

• Reverse Mortgage Pros and Cons

• What is a Reverse Mortgage

• Reverse Mortgages - How They Work

• Reverse Mortgage for Seniors

• Disadvantages of a Reverse Mortgage

• Reverse Mortgages Requirements