Thursday, March 19, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems
We have written before about the hazards elderly homeowners face when taking out reverse mortgages. A reverse mortgage is actually a loan you take out against your home. You must be 62 or older to qualify, and the amount you borrow is determined by your age, the interest rate and the value of your home.
Homeowners often forget that they still have to pay homeowners insurance, property taxes, and keep the home in good repair. Also, the upfront fees on a reverse mortgage can be quite high, so if borrowers don’t plan on staying in the home for a long time, a good bit of the home equity will go to fees, with very little benefit to the borrower.
One of the tragic things that often comes up is if one spouse is not listed as a borrower on the reverse mortgage. When the borrowing spouse dies before the other, the surviving spouse may be forced from the home to repay the reverse mortgage. It’s sad to see elderly people forced to sell their home and be pushed out on the street. If the home’s value has depreciated, they will get little or no good out of their lifelong investment.
But a new law to safeguard seniors from the risks of reverse mortgages and to provide equal protections for all homeowners has been enacted in New York. The law requires that all real estate regulations apply equally to owners with reverse mortgages as well as regular homeowners.
The bill will prohibit deceptive advertising practices as well as control the marketing of such mortgages. The bill also requires that independent counseling must be provided for those who apply for reverse mortgage loans. The borrower and lender must both be represented by counsel during the property closing. Foreclosure on mortgaged property because of the failure of the mortgagor to be in residence on the property, either because of death or moving to assisted living is prohibited until an inspection of the property can be completed.
The law took effect March 5, 2020.
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