About reverse Mortgages

Reverse Mortgages – What’s the deal?

I hear this term tossed about from time and time and have seen the commercials on TV. I decided to do a little investigating and I’ll share with you what I found out.

A reverse mortgage is available only to homeowners age 62 and older. It is a loan against the equity in a home that does not have to be paid as long as the homeowners live there. Homeowners can receive payments from the lender in lump sums, monthly payments or as a line of credit. At such time as the borrower dies, sells the house or permanently moves away, the loan must be paid in full including all interest and other charges.

There are reverse mortgages available from state and local governments. FHA insures a reverse mortgage called the Home Equity Conversion Mortgage (HECM). FHA insured reverse mortgages have an age requirement, required counseling and education, and a current appraisal. However, there are no income or credit qualifications. FHA also allows for up to a four-unit home and FHA approved condominiums and manufactured homes. These loans usually have to be used for specific purposes such as taxes or repairs.

Reverse mortgages are also available from banks, mortgage companies and savings associations. These can be used for any purpose. The amount you can borrow from the private sector reverse mortgages will probably depend on your age, home value, location and and cost of the loan (fees, etc.).

The AARP website gave a good example of why this “too-good-to-be-true” loan probably is. “For a 74-year-old borrower living in a $250,000 home in May of 2006 who borrows one-half of the maximum loan amount at closing, the total amount paid during her remaining life expectancy (12 years) could be about $7,800.” After totaling the “upfront and ongoing costs described for this 74-year old borrower…..would total about $25,000.”

I’m most definitely not a finance expert nor claim to be. However, I found several websites that had a lot of good information.

Aarp.org

Fha.com

Fanniemae.com

Ffsenior.com

As with any financial decision, the more you know the better. And be sure to get multiple opinions from a variety of sources.

Witten by Lesley Wolfe

Information is for academic purposes only, please seek the advice of appropriate professionals when considering a large financial decision, like a reverse mortgage.