Trends in Reverse Mortgages

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Reverse mortgages were first introduced in the finance sector back in 1961.According to official statements from US Department of Housing and Urban Development, there is usually a higher preference of HECMs at 90% as compared to other types of loans in reverse mortgage. Reverse mortgages have been gaining a lot of popularity especially in USA and UK where living standards are specifically very high especially after retirement. Seniors who wish to apply for these loans require being at least 62 years of age and should have official documents proving ownership of their homes. Reverse mortgage loans apply the use of home equities as securities to cover the loans. Therefore, in order to qualify for these loans, a senior must be the legal owner of the home whose equity is to act as security for the loans.

Why Take a Reverse Loan?

There are different reasons as to why home owners usually take reverse mortgage loans. The main reason however is so as to ensure that they are able to pay off the first mortgage balance using the money from these loans. Others take the loans so as to be able to improve their life’s quality and also undertake a few repair works on the home. There are still other people who usually take these loans so as to be able to meet the financial needs of unexpected costs that may arise later in their retirement years. Despite the reasons that may prompt a home owner to take a reverse mortgage, the main factor is so as to meet personal financial needs in retirement.

The main reason as to why the popularity of reverse mortgages has increased greatly is because there has been enhanced knowledge on how these loans operate. In addition to this, reverse mortgages have been presented to home owners as the best way through which one can have a happy retirement life. Government incentives such as no taxation of reverse mortgage loans have also gone a long way in increasing the acceptability of these loans among most people. These loans come with very advantageous terms and conditions that may include fairly low interest rates. As such, most people these loans in that they do not impose any financial burdens on the borrowers. What is more amazing about these loans is the fact that they only mature after the death of the borrower.

Repayment by heirs?

Reverse mortgages can be applied for separately by an individual home owner or as a joint venture between two owners. Even in the latter case, the loans only mature after the death of both home owners. Upon death of the borrowers, the heirs of the estate are expected to repay back the loan where they may decide to repay back the loan, sell the estate or even pass its ownership to another lender. The best repayment strategy to take is usually dependent on a number of factors that may include the balance amount of the mortgage loan and the financial muscle of the heirs. In the recent past, most lenders have been issuing these loans as a lump sum mainly due to the instability of the economy.

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