Over time, the borrower is given more and more money, which means the loan amount grows and the equity in their home is reduced.
As you can see, there are great benefits for the homeowner. They get money they need, they can remain living in the home for the rest of their lives, they don’t risk loosing their home, the home does not necessarily have to be sold to pay the loan and the home can even be willed to heirs. The loan can be paid back any way at all, by getting funds elsewhere or by applying for a regular mortgage on the home or by selling it.
What could go wrong. The lender could go bust (for any number of reasons) and the borrower would then not get the money owing. Also, if the senior lived for a very long time, the equity in their home could eventually run out and the lender could make a loss and so go bust, which means that the borrower and others would not get the money that they were promised.
The US government looked hard at this type of loan and realized it offered many seniors a way out of debt and allowed them to better enjoy their retirement years.
This guarantees that any senior who joins a FHA reverse mortgage program will always, no matter what, get all the money they are entitled to. To date this remains the most popular program with over 90% of the market share .and allowed them to better enjoy their retirement years.
What could go wrong. The lender could go bust (for any number of reasons) and the borrower would then not get the money owing. Also, if the senior lived for a very long time, the equity in their home could eventually run out and the lender could make a loss and so go bust, which means that the borrower and others would not get the money that they were promised.
