The rules for obtaining a reverse mortgage are getting tougher, and that’s a good thing for those who need them.
Reverse mortgages allow homeowners to borrow against the equity in their homes. They can take it in a lump sum, monthly payments or as a line of credit to take as needed.
But many homeowners run into trouble and end up broke and without a place to live.
The rules say that the loan must be repaid in full when the homeowners no longer live in the house.
But many who get reverse mortgages run into trouble when they pull all the equity out of their homes, spend the money, and then can no longer pay for insurance, taxes and upkeep.
New federal rules enacted last year limit those getting reverse mortgages to taking 60 percent of the available equity in the house in the first year. In subsequent years, they can tap the rest.
The change should make it harder for borrowers to dig themselves a hole they can’t get out of, according to a story in the Wall Street Journal.
The story says those considering reverse mortgages should get counseling on the matter, either from their estate planning attorneys, financial advisors or an organization, NeighborWorks America, that helps people with these decisions.
If you have questions about a reverse mortgage or an estate planning matter, feel free to call us for a consultation at (626) 696-3145.
