 Demystifying
the Reverse Mortgage
Obtaining a reverse mortgage is a great way to buy a
home with little upfront costs.
by Craig Romero
Wise Mortgage Info
April 29, 2004
The term is being heard by homeowners near and far, but what exactly
is a “reverse mortgage?” It’s a relatively new option, and one that
is surrounded by many myths and misunderstandings.
When you get down to it, a reverse mortgage is a rather simple
and straightforward option for many homeowners who can take advantage
of the benefits that this mortgage method affords them. A reverse
mortgage is a loan on a home that does not have to be paid back
for as long as the homeowner lives in that home.
To qualify for a reverse mortgage, homeowners must meet certain
criteria, and normally must be 62 years of age or older. This type
of mortgage offers homeowners the benefit of taking out a home equity
type of loan, without the obligation of having to make monthly payments
to repay the money borrowed. With today’s economy, and so many senior
citizens living at or below poverty level, this relatively new mortgage
program may offer the perfect opportunity for qualifying seniors
to get back on their feet.
There are three main types of reverse mortgage programs offered
today. They fall into three categories:
- FHA Insured
- Lender Insured
- Uninsured
The exact details of each of these reverse mortgage types differ,
and for homeowners thinking about pursuing a reverse mortgage program,
a reverse mortgage counselor should be consulted to find out which
type of reverse mortgage best suits your needs.
With a standard or “forward” mortgage or home equity loan, a home
owner is responsible for making monthly payments to repay the debt
of the loan. Reverse mortgages only require the homeowner or the
homeowner’s heirs to pay the loan back when the homeowner is no
longer living in the home. If the homeowner decides to sell the
home and move out, the loan will be paid back by the proceeds of
the home sale. If the homeowner has passed on, and the heirs are
responsible for paying the reverse mortgage back, the mortgage can
be satisfied by rolling the reverse mortgage into a “forward” mortgage
or selling the home and using the proceeds to satisfy the loan requirement.
When a homeowner does opt for the reverse mortgage option, there
are three main ways that they receive the funds from the loan. Homeowners
can receive a one-time lump sum in cash, a regular monthly cash
disbursement, or an open credit line that allows the homeowner to
determine how and when they need the funds paid to them.
If you, or someone you know, is a homeowner 62 years of age or
older and is in need of cash to cover their daily living expenses
or would like their home to provide a source of regular income,
this is an option that is growing ever popular and should be looked
into and considered.
- Craig Romero
Discover how to quickly build a minimum of $40,000 worth of
home equity and pay your mortgage off in 10 years or less without
making biweekly mortgage payments. Visit: http://www.wisemortgageinfo.com
Craig Romero is an author and mortgage analyst dedicated to
helping homeowners maximize the investment in their homes.
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