| One of the things that we always explain to senior | | | | to be greater than the value of the property. |
| borrowers when they ask about reverse mortgages is | | | | While the interest rates are low, many don't think about |
| that they are non-recourse loans. The next question is | | | | it but if the rates were ever to increase sharply on the |
| always, What is a non-recourse loan?. This is a very | | | | adjustable rate reverse mortgages, then equity would |
| important feature of the reverse mortgage and I want | | | | be eroded much more quickly as well (a good |
| to take a moment to explain just what non-recourse | | | | example of this is to check the difference between |
| means and how that affects senior borrowers who | | | | the HUD Home Equity Conversion Mortgage HECM or |
| get reverse mortgages. | | | | Heck-um and a propriety jumbo reverse mortgage |
| Simply put, a non-recourse loan means that the lender | | | | with an interest rate nearly 4% higher and see how |
| has only your property as security for their loan they | | | | much more quickly the balance rises on the higher rate |
| have no other way to obtain repayment of the | | | | mortgage). This is where the non-recourse nature of |
| principal and interest in the event something happens | | | | the loan is so important, regardless of what you owe |
| and your home is not worth enough to pay off the | | | | when the loan becomes due as a result of your |
| obligation including all interest and fees. Could this ever | | | | moving out of the home or passing, you or your heirs |
| happen? The loan itself is designed utilizing actuarial | | | | can never owe more than your home is worth. |
| tables and knowing when most borrowers will vacate | | | | This means that you can live in your home for life, |
| their homes due to passing or other reasons. Some | | | | never make another mortgage payment, and never |
| borrowers absolutely blow these tables out of the | | | | have to worry about passing an obligation on to an |
| water living active productive lives many years beyond | | | | heir. In most scenarios, you still pass equity on to your |
| the average life expectancy. Also, while most | | | | heirs but it's nice to know that regardless of how much |
| properties appreciate and stay ahead in value of their | | | | money you receive on your reverse mortgage, how |
| loan balances, it is feasible that during times of | | | | long you live in your property, what the interest rates |
| extended downturns in values growing balances due | | | | do, or what values do in the future, you or your heirs |
| to money borrowed, accrued interest and charges and | | | | can never owe more money than the property is |
| longer than expected loans due to prolonged lives, etc. | | | | worth. That non-recourse feature is one of the kinds |
| the balance of the reverse mortgage loan could grow | | | | of security the reverse mortgage is known for. |