Are Reverse Mortgages Getting Safer?
Reverse mortgages are typically not regarded as the safest type of mortgage loans. According to the Consumer Financial Protection Bureau (CFPB), they are associated with certain issues such as “misleading marketing and inappropriate lending”.
But currently efforts are underway to change that. The new federal rules that are already in effect reduce the amount of the home’s value that can be borrowed against “and require lenders to make sure that borrowers can cover upkeep.” Furthermore, financial instututions themselves are trying to increase the popularity of reverse mortgages by offering responsible loans and offering customers “broader financial advice”.
According to some financial advisors, reverse mortgages can be very effective as standby credit. While home-equity lines of credit “can be frozen during a financial crisis, reverse mortgages stay open.”
Still, before anyone goes for a reverse mortgage, they should consider how long they are planning to stay in their current home. This type of loan is more sensible for borrowers who have planned to keep the same home for years.
Read the full article in Time Money.