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Avoid Predatory Lending
Reverse Mortgages: Potential Income for Older Americans
Reverse mortgages have become very popular in recent years as a source of income for older Americans. A reverse mortgage is a loan secured by home equity that doesn’t need to be repaid until the end of the loan term, which is usually when the homeowner no longer occupies the home as a principal residence, sells the home, or dies.
According to North Carolina state statue, if you apply for a reverse mortgage loan you must receive counseling from a state-certified housing counselor who will help you understand the implications of your choice. This counseling is best provided and most effective in a face-to-face setting. A Borrower may be charged up to $125 or a sliding-scale fee (based on their ability to pay) for this service. Whether or not a borrower is charged is left up to the reverse mortgage counseling agency.
See a list of counselors who meet the U.S. Department of Housing and Urban Development's current requirements for Certified Reverse Mortgage Counselors.
If you obtain a reverse mortgage, you remain responsible for maintenance, insurance and taxes for the home during the loan period. You can use the money from the reverse mortgage however you choose. You cannot be forced to sell or vacate the home if the money received from the loan exceeds the value of the home. In addition, should you die and your spouse is a co-borrower, he or she cannot be forced to sell the house as long as he or she occupies the home as a principal residence.
When the borrower (and any co-borrower) dies, the loan balance plus accrued interest becomes due and payable. Your heirs may repay the loan and keep the home, or sell the home, repay the loan and keep the balance. If the loan exceeds the property value, your heirs will owe no more than the property value, and no additional financial claims can be made against them or the estate.
To qualify for a reverse mortgage, you and any co-borrower must be at least 62 years old, must own your home free and clear (or have a very low outstanding debt), and must occupy the home as your principal residence.
A list of approved lenders for reverse mortgages in North Carolina can be obtained from the N.C. Commissioner of Banks.
For more information, read The Reverse Mortgage: Trading Equity for Cash.
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