Over the last decade, reverse mortgages have been aggressively pitched in TV ads as an easy way for seniors to cash in their home equity to pay for living expenses. However, for many, improper use of the product -- such as pulling all their cash out at one time -- has led to significant financial problems later, including foreclosure.
In actuality, there are some cases where reverse mortgages can be helpful to borrowers. However, it's essential to do extensive research on these products before you sign.
Reverse mortgages are special kinds of home loans that let borrowers convert some of their home equity into cash. They come in three varieties:
Single-purpose reverse mortgages. Offered by some state and local government agencies and nonprofit organizations, these are aimed at low- and moderate-income borrowers. They are not available everywhere and can be used for only one purpose, such as home repairs, improvements, or property taxes. Federally insured reverse mortgages. Known as Home Equity Conversion Mortgages (HECMs), they are backed by the http://portal.hud.gov/hudportal/HUD
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