What is a reverse mortgage?
A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner’s insurance.
- The minimum age for home owners must be at least 62 years of age
- The house should be the principal residence
- You must not be delinquent on any federal debt
- Free consultation with an independent counselor who’s approved by the Department of Housing and Urban Development (HUD) and from a HUD-approved agency
Reverse mortgages allow elders to access the home equity they have built up in their homes now, and defer payment of the loan until they die, sell, or move out of the home. Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower (or the borrower’s estate) is generally not required to repay any additional loan balance in excess of the value of the home.
Specific rules for reverse mortgage transactions vary depending on the laws of the jurisdiction. For example, in Canada, the loan balance cannot exceed the fair market value of the home by law.
One may compare a reverse mortgage with a conventional mortgage, where the homeowner makes a monthly payment to the lender, and after each payment, the homeowner’s equity increases by the amount of the principal included in the payment.
Regulators and academics have given mixed commentary on the reverse mortgage market. Some economists argue that reverse mortgages allow the elderly to smooth out their income and consumption patterns over time, and thus may provide welfare benefits. However, regulatory authorities, such as the Consumer Financial Protection Bureau, argue that reverse mortgages are “complex products and difficult for consumers to understand,” especially in light of “misleading advertising,” low-quality counseling, and “risk of fraud and other scams.” Moreover, the Bureau claims that many consumers do not use reverse mortgages for the positive, consumption-smoothing purposes advanced by economists. In Canada, the borrower must seek independent legal advice before being approved for a reverse mortgage.
Reverse Mortgage Information
Welcome to our reverse mortgage information site. Here we provide free reverse mortgage info for senior citizens who maybe considering a reverse home equity loan. We encourage you to check out the information available on our site so you can make the right decision for you. You will also find out about the different types of mortgages and also links to reverse mortgage lenders.
Many senior citizens were not able to save money for their retirement years, and are now dependent upon social security for their monthly income. In addition to having to make monthly mortgage payments, local property taxes frequently go up to support town services and schools. Eventually, many retired people reach the point where they feel they have to sell their family home and move to a less expensive living situation. But there is another alternative – a reverse mortgage.
It is hard to believe that a bank will pay you money so you can stay in your home, rather than the other way around. But if you have equity in your home, (what it would sell for less what you still owe) it is easy to obtain a reverse mortgage. The money you obtain from the bank does not have to be paid back until you cease to occupy the house as your principal residence. That is, until you or the last remaining spouse sell the home, pass away or move out permanently.
Reverse mortgages were created in 1989 and are available to homeowners age sixty-two and older. Types of homes that are eligible include single-family; manufactured homes built after June, 1976; and qualified condominiums and townhouses. Mobile homes generally do not qualify nor do cooperatives.
The money you receive from a reverse mortgage can be used for just about any purpose. People use the funds for repairs and home improvements, as a supplement to their monthly income, paying property taxes and health insurance premiums, or paying off credit cards.
Unlike a regular mortgage, there are no income requirements to qualify. You are simply borrowing from the equity you have accumulated in your home that you don’t have to pay back until you leave the home permanently.
The money can be loaned to you as a lump sum, a fixed monthly payment or as a line of credit that you use whenever you need it. The amount of money that will be loaned to you depends upon the age of the youngest person who is taking out the reverse mortgage, the appraised value of the home, current interest rates and the town where the home is located. The older you are and the more equity in the home, the more money you will receive. The other good news is that the loan from a reverse mortgage is tax free.
So before you put out that For Sale sign, look into the potential opportunities offered by a reverse mortgage.
There are several types of loans available such as:
1. Home Equity Conversion Mortgage (HECM)
2. Fannie Mae Home Keeper Loan
3. Financial Freedom Cash Account
Reverse Mortgage loans are available in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia and Wisconsin