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Are Reverse Mortgage Loans Safe?

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This question comes up quite often, and of course, it is a huge concern for people who are considering a reverse mortgage loan.

Fortunately, HUD has included a few safeguards intended to protect you and other consumers who take out a reverse mortgage loan.

Safeguard #1:  HUD Counseling Session

HUD requires all perspective reverse mortgage borrowers to have a counseling session with a HUD approved, third-party reverse mortgage loan counselor.  During this appointment, the counselor will ensure that you understand how the loan works and will let you ask as many questions about the loan as you'd like.  This counseling session is conducted either over the phone or in person by an independent third party.  This ensures that you are getting the facts from someone who has no stake in whether you go forward with the loan.  Get a list of HUD approved reverse mortgage loan counselors here.

Safeguard #2:  Rule Protects Married Couples

In the past, you could do a reverse mortgage loan in the name of only one spouse.  This was most commonly seen when one spouse was old enough to do the loan, but the other was not. This was not safe for the spouse who was not on the loan, because he or she had no claim to the home and could not stay there if his or her older spouse passed away first.  

HUD now has a rule which covers both spouses in this situation.  If one spouse is too young to qualify, he or she is considered a "non-borrowing spouse".  The non-borrowing spouse can remain in the home even after his or her older spouse passes away.  It is important to discuss this thoroughly with your loan officer and counselor so that you and your spouse understand how it works.  Note:  In Texas, both spouses must be 62 or older to qualify.

Safeguard #3:  Non-Recourse Feature

The FHA insured reverse mortgage loan protects borrowers and their heirs through a non-recourse feature.  What this means is that, if the home value is ever less than the loan balance, the lender cannot come after you or your heirs for the deficit.  You will only have to repay the loan balance or the value of the home...whichever is less at the time of sale.

As you can see, there are many safety features which help protect you and your heirs when you take out a reverse mortgage loan.  Does that mean it is right for everyone?  Of course not. It is important to weigh all of the facts before you decide what makes sense for you.

Interested in learning more about the reverse mortgage loan?  Be sure to sign up for our free reverse mortgage loan guide, or call us: 855-469-7383, ext. 802.

About the Author Laura Funderburk

Laura Funderburk is a highly sought after reverse mortgage loan specialist in Dallas, Texas. She has focused on this specialty loan for many years and stays up-to-date on the latest trends and changes. She is known for helping retirees supplement their retirement income using a reverse mortgage loan without being pushy or overbearing.

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