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Reverse Mortgages: Information You Need to Know
Reverse Mortgages are exploding in popularity and as the baby
boomers reach age 62 and beyond they will become eligible to cash
in on their home equity with a reverse mortgage.
A reverse mortgage is a home loan that you do not have to pay
back for as long as you live in your home. It can be paid to you
in one lump sum, as a regular monthly income, or at the times and
in the amounts you want. The loan and interest are repaid only
when you sell your home, permanently move away, or die.
Who is eligible for a Reverse Mortgage?
All homeowners must be at least 62 years old.
At least one owner must live in the house most of the year.
What kind of homes are eligible for a Reverse Mortgage?
Single family, one-unit dwellings.
Two-to-four unit, owner-occupied dwellings.
Some condominiums, planned unit developments or manufactured
homes.
NOTE: Cooperatives and most mobile homes are not eligible.
How does a Reverse Mortgage work?
Most require no repayment for as long as you live in your
home. They are repaid in full when the last living borrower dies,
sells the home, or permanently moves away. Because you make no
monthly payments, the amount you owe grows larger over time. By
law, you can never owe more than your home's value at the time
the loan is repaid. You continue to own the home, so you must pay
the property taxes, insurance, and repairs. If you fail to pay
these, the lender can use the loan to make payments or require
you to pay the loan in full.
How do you receive money from a Reverse Mortgage and how much
money can you get?
Reverse mortgages can be paid to you:
- All at once in cash;
- As a monthly income;
- As a credit line that lets you decide how much you want and
when;
- In any combination of the above.
The amount you get usually depends on your age, your home's
value and location, and the cost of the loan. The greatest
amounts typically go to the oldest owners living in the most
expensive homes getting loans with the lowest costs.
Most people get the most money from the Home Equity Conversion
Mortgage (HELM), a federally insured program.
What are the different type of Reverse Mortgages
available?
Loans offered by some states and local governments are
generally for specific purposes, such as paying for home repairs
or property taxes. These are the lowest cost reverse mortgages.
Loans offered by some banks and mortgage companies can be used
for any purpose.
How much does a Reverse Mortgage cost?
The costs for loans from banks and mortgage companies usually
include the following:
- Application fee
- Insurance
- Origination fee
- Monthly service fee
- Closing costs
- Interest
These costs are usually added to the loan balance (what you
owe). HECM loans are almost always the least expensive reverse
mortgage you can get from a bank or mortgage company, and in many
cases are significantly less costly than other reverse mortgages.
Reverse mortgages are most expensive in the early years of the
loan and generally become less costly over time. Before getting a
reverse mortgage other than a government or HECM loan, carefully
consider how much more it will cost you.
What else should I know about Reverse Mortgages?
The federal government requires you to see a
federally-approved reverse mortgage counselor as part of getting
a HECM reverse mortgage.
Allen Daniels offers a Free Online Video about Reverse
Mortgages that shows you How to Cash in With Reverse Mortgages.
You can view the video at http://www.ReverseMortgageTips.com/
 MORE RESOURCES updated Sun. March / 21 / 2010
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