A series of extensive financial assessment applying for a standard home mortgages always have been different: They're available only to those 62 and older who have equity in their homes that they want to convert into cash. There are no repayments required until the borrower sells the house, moves out or dies.
Loan recipients' main responsibilities are to keep current on local property taxes, pay hazard insurance premiums and keep the place in reasonable condition.But during the recession and mortgage bust years, thousands of borrowers fell into default because they didn't pay their required property taxes and hazard insurance premiums.
Borrowers who seek to use a reverse mortgage as part of their overall retirement,financial planning, including raising money to purchase a new house or to establish a flexible line of credit they can draw from as needed.On top of that, real estate values plunged, producing huge losses on defaulted and foreclosed properties.
The changes, say reverse mortgage industry experts, will exclude potentially thousands of older homeowners from obtaining a reverse mortgage, especially those who are on the margins economically and need the cash to help pay for ongoing household expenses.
Before applying, be aware of the types of documentation you'll need. And when you talk with a lender or financial counselor about a reverse loan, make sure you involve the entire family, so everybody knows what you are getting into.
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