Wisconsin Reverse Mortgages

I can't remember how many times I've been asked "What is a reverse mortgage." Reverse mortgages are a super way to use the best asset you have, your house. A reverse mortgage allows you to take back the equity you have appreciated in your house over the years. It is opposite of you paying the lender every month, they actually pay you to live there.

To understand the reverse mortgage we need to compare it to a normal mortgage like when you bought your house or refinanced it called a "forward mortgage". To qualify for forward mortgage, you must have exceptional credit, a steady source of income and equity in your house (down payment if buying). The note which is the loan is secured by a mortgage which attaches the note to your house. This means if you default on your payments the lender can take your house away. As you pay your mortgage you lower the amount you owe thus creating equity in your house. When the last mortgage payment is made, the house belongs to you.

On the other side of the spectrum is the reverse mortgage qualification which is much easier. Credit is not an issue because there is nothing to repay monthly. No income is needed because the lender is not expecting any payments. The major criteria is that the house is owned and lived in by the applicant. Age is also a consideration as you must be 62 and older for all borrowers. The older you are the larger the loan will be because the likelihood of using all your equity is less. Needless to say the house must have more equity than a forward mortgage.

A forward mortgage or conventional mortgage is a decreasing debt loan where a revers mortgage is generally an increasing debt mortgage. Instead of making any monthly payments, the amount loaned has interest added to it - which eats away at your equity. If the loan is over a long period of time, when the mortgage comes due, there may be a large amount owed. The amount can never be more than the house though. Also the lenders are usually pretty conservative with the loan so the likelihood all equity is used up in very small. Your heirs will never have to pay any extra to cover the loan.

When deciding how to draw money from the reverse mortgage, there are a few options; a single lump sum, regular monthly advances, or a credit account. When taking out the loan the contract spells out when the loan must be repaid. They are when both borrowers have passed away, neither borrower has lived in the house for the last twelve months, or you want to sell the house.

Failure to pay your property taxes or insurance on the home will undoubtedly lead to a default as well. The lender also has the option of paying for these obligations by reducing your advances to cover the expense. Make sure you read the loan documents carefully to make sure you understand all the conditions that can cause your loan to become due.

This article wasn't meant to answer every question about reverse mortgages but should give you enough understanding to move forward.

David Forer http://wwwwisconsinreversemortgages.net.com/

About the author: David Forer is a personal reverse mortgage expert whose website http://www.wisconsinreversemortgages.net/ is dedicated to quality information about reverse mortgages.

A reverse mortgage enables homeowners over the age of 62 to safely convert their home equity into cash without taking on a mortgage payment. There are a few ways you can take the cash and we will discover those later. The most popular Wisconsin reverse mortgage is the Home Equity Conversion mortgage (HECM) that is insured by the federal housing authority or the department of housing and urban development. These government agencies regulate, market, and insure a vast majority of Wisconsin Reverse Mortgages. Needless to say they make sure that these programs are run the right way and seniors are not taken advantage of.

The question I am most asked by seniors who are considering a Wisconsin reverse mortgage is, "what are the benefits of doing a reverse mortgage?" I have listed some of the benefits below.

First and foremost is the fact you can receive payments instead of making them. Lets say you have a 50,000 mortgage left that was taken out 22 years ago. Your payment is about 750 a month with your current mortgage. If you have a good amount of equity available you could pay off that mortgage and eliminate the 750 payment and also get 300 a month paid back to you. That is a difference of over 1000 a month for your new budget.

The income you receive is considered tax free. If you get 500 a month it is really like getting 575 because no taxes are taken out. This is money you could be receiving for the rest of your life or as long as you live in your house. You will never have to repay the money for as long as you are living in the house.

The money you receive can be taken out as a lump sum, line of credit, or monthly installment payments. You can actually have a combination of the three if you chose the ultimate in flexibility for Wisconsin Seniors. This money you take out can be used as you see fit. There are no regulations about how the money is to be spent. Some examples are everyday expenses, grandchildren's education, taking trips or anything you can think of.

One of the key factors is that you retain title to your home. No one comes in and takes your house or starts making decisions based on what they feel is right for you. you get to live in the house for as long as you are able too. It is your house and titled in your name. many seniors feel they can't afford to live in their house with the expenses that are involved but this would give you the flexibility to live in the house as long as you want.

the final advantage I want to talk with you about is the qualifications. Unlike a mortgage they are really easy to get. First both spouses must be over 62. There are no income requirements to get approved. Unlike a standard mortgage where you have to show you can afford the payment, the reverse pays you. There are no basic credit qualifications other than no current bankruptcies or defaulted federal loans (check with an advisor may still be able to do something). The collateral needs to be a single family home, Condo, town-home, 2-4 unit building, and some mobile homes. In regards to housing it must be your primary residence. You must have a certain amount of equity in your house to qualify.

As you can see there are a lot of reasons to get a reverse mortgage and they are fairly easy to get. Wisconsin reverse mortgages are not for everyone though. It is imperative you do some research and call an expert in reverse mortgages. If you are certain you are going to do one, complete the HUD counseling as soon as possible. It is for an hour and can take up to two weeks to schedule. Hope this has helped you understand Wisconsin reverse mortgages.