Reverse Mortgage Information

Or, how to change your home equity into cash

In your lifetime, you've diligently made house payments for 30 or more years, raised children, paid for their education, and taken good care of all your family's needs. But now that you're retired and on the threshold of the golden years of your life, you're strapped for cash and facing difficult times. A reverse mortgage might be the solution to all your troubles.

What exactly is a reverse mortgage?

One way for a retired homeowner to raise money when in need is to sell his home, requiring him and his family to move out of a residence which might be associated with years of cherished memories. Another way is to get a home equity loan, which needs to be paid back. Yet another option is to take out a loan that enables the homeowner to use his home's equity without selling the home or moving from it. Even though it sounds too good to be true, this is what a reverse mortgage is all about.

Do you qualify for it?

The good thing is that you don't need a minimum income to qualify for a reverse mortgage. You could have no income or even still owe money on a conventional mortgage. In fact, some seniors get reverse mortgages to pay off a first mortgage. The only eligibility requirements are:

Age: You need to be at least 62 years of age or older.

Residence: The home you put up as collateral must be your primary residence. If you own your property jointly, the other owner(s) must also sign on to the loan.

HUD -approved counseling: Before borrowing, applicants must seek HUD-approved counseling that ensures they completely understand the process.

How much money can you get?

The amount of cash you can receive from a reverse mortgage generally depends on:

The specific reverse mortgage plan or program you select

Your age

Your home's appraised value

Interest rates and closing costs on local home loans

Other costs of the loan

You can take receipt of the loan in whatever fashion you choose. These include:

AA one-time lump sum

AA line of credit

Fixed monthly payments for a predetermined period of time

Or a combination of the above

Do you need to repay the loan?

A reverse mortgage comes due and must be repaid when the homeowner passes on, permanently moves out (to live with a family member or to a nursing home in most cases), or sells the home. Otherwise, you're free to stay in your home as long as you wish. If the homeowner passes on, his heirs can pay the loan back, with interest, and keep the home. Alternatively, they can sell it to a third party and repay the lender out of the proceeds.

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