In the recent times reverse mortgages are becoming a more preferred option for supplementary income among senior citizens. According to a statement issued by Peter Bell who is the president of NRMLA or the National Reverse Mortgage Lenders Association, around 911,314 reverse mortgages have been taken since the programs inception and this number is expected to go up to 1 million in the first half of this year¹.
How to Shop for Reverse Mortgages in Illinois
For all those who do not know what a reverse mortgage is, you may have heard the term Home Equity Conversion Mortgage (HECM) loan and this is a way to get cash for seniors in exchange for a portion of equity of their home. It is seriously a good source of supplementary income as mostly reverse mortgages are tax free² and also one is not expected to make monthly mortgage payments³. Another interesting thing about this mortgage is that depending on the need one can opt for either taking the loan proceeds as a lump sum or as monthly payments and even as a line of credit.
If you are wondering how and when you have to repay the loan, well it is only due when the home owner permanently leaves the residence or passes. When either one occur the borrower or their heirs have to option to buy, release the home to the lender or sell the home.
A Reverse Mortgage may sound like a great option you must really careful when choosing the reverse mortgage lender. A best way to avoid getting duped is to ask a lot of questions. Below are some things to be aware of when shopping for a reverse mortgage.
- Avoid lenders that tell you to invest the proceeds from this loan proceeds into another investment vehicle such as an annuity.
- Avoid lenders advertising reverse mortgage loans as “no cost or no fee” loan⁴.
- Avoid lenders who are charging a fee that is as high as the amount of proceeds you would receive from the loan.
- Avoid lenders advertising reverse mortgage loans as “government loan”, “government benefit” or a lender that states their loan is “HUD or AARP approved”.
1. An informative articles about Reverse Mortgages – cbsnews.com, by Ilyce Glink, 1/11/16,
2. It is always advisable to consult a good financial advisor or appropriate government agencies to get an unbiased opinion about reverse mortgages.
3. Certain benefits of reverse mortgages are only applicable if it is the primary residence of the borrower who continues to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
4. Some common mistakes that can happen when Seeking a Reverse Mortgage – houselogic.com, by Barbara Eisner Bayer, 11/4/13,