Reverse Mortgages

Seniors using reverse mortgages are finding out there are few negatives in the experience

. Not wanting to risk their hard-earned equity, many have been hesitant to explore this new type of mortgage. Be learning the facts, seniors are discovering a great way to access some of their cash now, without having to move out of their homes.

Reverse mortgages are low-interest loans available exclusively to seniors. Using the equity in a home as collateral, the loan does not require payments until the home is no longer the primary residence. Seniors dont have to worry about forgetting about a payment. They are worry-free and hassle-free. There is no payment until the home is no longer the primary residence, and even then the estate has approximately 12 months to settle the loan.

Reverse mortgages are calculated based on the value of the home and the age of the youngest homeowner at the time the mortgage is generated. Although there are limits, the higher the value of the home, the higher the equity status and the higher the age, the greater will be the recipients payout.

There are several ways for seniors to access the equity they have built up over the years. Some of the more common ways are: receiving equal payments for a fixed number of years, establishing a line of credit used until the established equity is used up, a one time lump sum, or tenure, where the homeowner receives equal monthly payments as long as the homeowner lives in the home. Mortgages can be structured as any of these, or even as a combination of more than one. Reverse mortgages are designed with each individual mortgagee in mind.

There are few exclusions to the types of homes eligible for this mortgage. Even many mobile homes, if they were built in the last 30 years, can qualify. (They must be on land owned by the mortgagee, with a permanent foundation.) All homes must have an FHA inspection, and the homeowner must have at least 35% equity in the home. The mortgage balance can even be paid off with the proceeds of the loan at closing. If there is more than one homeowner, the youngest one must be at least 62 years of age.

The fact there are no income or credit requirements for reverse mortgages also makes them attractive. Few seniors have an income that would support a mortgage. With reverse mortgages, the mortgage supports the senior! There is no longer financial pressure to make a payment or move out. The homeowner is able to use their own money to stay in their own home.

When the senior changes their primary residence or in the event of death, the estate can choose whether to sell or to repay the reverse mortgage. If the equity in the home is still positive, the equity belongs to the estate. If the money received from selling the home is not sufficient to pay off the reverse mortgage, the lender is forced to take a loss and then can request the FHA to reimburse their loss. At no time is the homeowner at risk.

by: Steven Rossi

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