If you’re a senior citizen and own a house as the primary residence, then one good option available before you is a reverse mortgage loan. In case of a conventional loan, you have to make mortgage payments. With each payment, your equity in your home is increased in a traditional loan. But, in case of a reverse mortgage loan, you are being paid on a regular basis and with each payment, your equity is decreased.
In reverse mortgage loan, you don’t have to repay unless you sell the property. You can use the reverse mortgage proceeds as per your wish. A reverse mortgage loan actually helps you maintain the same kind of lifestyle that you earlier used to enjoy. Anyways, in recent times, some disturbing trends have emerged in this mortgage loan aimed for the senior citizens. Here we try to have a look at 4 serious disturbing trends that the reverse mortgage market is undergoing.
1. Average borrowers’ age has decreased
Reverse mortgage loans are meant for the people with age of at least 62. According to the data provided by the Reverse Market Insight, in 2000, the average age of borrowers opting for reverse mortgage loan was 76. In 2011, this average age of the borrowers decreased to 62. It is likely that the younger you are, you’ve less equity to support you post retirement. Again, average age of people has also increased. In other words, people are using their home equity to fund their long life.
2. Borrowers are preferring lump sum reverse mortgage loan
It is now a common trend to take out lump sum reverse mortgage loan. According to the report of the Consumer Financial Protection Bureau, currently nearly 70% of the reverse mortgage loans are being taken on the lump sum fixed rate basis. This is indeed a dangerous trend. This means that an average borrower will deplete his/her home equity much earlier. This in turn implies that an average borrower may not get the loan at a very old age.
3. Many well established lenders have left out
Many well established and recognized lenders have left the reverse mortgage markets in recent times. This has opened up opportunities to enter this market. With changes in the regulatory landscape and the inexperience of these smaller lenders may pose new threats for you.
4. Objectionable marketing practices resorted to by many lenders
In order to expand their business at any costs, some lenders are resorting to immoral marketing practices. Some lenders are advertising aggressively to sell their products. Some of the lenders are claiming ‘reverse mortgage money as free money’, ‘money is coming from the Federal Government’, ‘borrowers would never lose their homes’ etc. Many of the senior citizens of the country are falling prey to these ill-motivated advertisements.
Just because of the fact that you’re over 62, you should not go for a reverse mortgage loan. You need to check out whether or not your home equity is sufficient. You also need to check out your requirements as well as overall financial situation. It would really be a bad strategy if you’ve to sell your home after taking out a reverse mortgage loan.