Like any other important financial decision, choosing to take out a reverse mortgage comes with potential risks as well as potential benefits. You have may have built up a lot of equity in your home in the Los Angeles area. In this case, you can have several choices in reverse mortgage. It’s important to understand your options and the risks that could be involved with a reverse mortgage to make the choices that are right for you.

Reverse Mortgages Use Your Home’s Equity

How much is your paid-off or nearly paid-off home worth? This is the equity in your home. In a high-cost area like Los Angeles County, home values can mean you have much more equity in your home than your original home mortgage amount.

As a result, one important thing to remember about reverse mortgages is that they use the equity that you have built up in your home. You have the potential to tap into a significant amount of equity through a reverse mortgage.

You can invest the funds from a reverse mortgage, or you can use them to pay for living costs. However, using your home’s equity through a reverse mortgage means that the equity could be at-risk.

Considerations of Risk With Reverse Mortgages

With a reverse mortgage, you continue to own your home. That means that you remain responsible for property tax, maintenance costs, upkeep of the home, and homeowners’ insurance.

Reverse mortgages are also intended for primary residences.
If you move away for a long period of time, the lender could foreclose on the mortgage. They could also foreclose if you do not pay for homeowner’s insurance or property taxes.

According to the National Council on Aging, some homeowners have also lost their homes because they failed to meet Federal Housing Administration (FHA) requirements for home maintenance. 

Using A HECM (Home Equity Conversion Mortgage)

An HECM is a specialized type of reverse mortgage that is available for adults over age 62. This type of mortgage is issued by lenders who have been approved by the Federal Housing Administration (FHA). 

The FHA has established regulations for HECM mortgages which are intended to protect you, the borrower, as well as the lender. People who apply for an HECM mortgage must complete a counseling course with an agency approved by the U.S. Department of Housing & Urban Development (HUD). The course explains the benefits and potential risks of an HECM mortgage for older adults.An experienced mortgage broker can explain the reverse mortgage process to you. They can also link you with an FHA-approved HECM lender. They can guide you through the HUD counseling process and explain the risks involved in a reverse mortgage.Contact California Platinum Loans today to learn more.

Sources:

Mohr, Angie. “The Dangers of a Reverse Mortgage,” Investopedia, 30 May 2022,

National Council on Aging, “A Guide to Reverse Mortgages for Older Adults,” 6 March 2022,