Reverse Mortgage For Seniors

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in one, or a combination, of the following ways:

• a lump sum
• regular monthly payments
• a line of credit that lets you decide when and how much of your available cash is paid to you

No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home.

• NO repayment for as long as you occupy the home
• NO taxes are paid on the cash
• NO pre-payment penalty
• You retain the title to your home
• You may sell your home at any time
• Cash may be used for any purpose
• Cash may be received in a variety of ways
• Social Security and Medicare benefits NOT affected
• After your estate pays the lender ALL remaining equity is paid to your heirs

In a "regular" mortgage, you make monthly payments to the lender. But in a "reverse" mortgage, you receive money from the lender and generally don't have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help senior homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.

To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don't have to make monthly repayments. So you don't need a minimum amount of income to qualify for a reverse mortgage.

In fact, you could have no income and still be able to get a reverse mortgage. Even bankruptcy does not disqualify as long as it has been discharged.

Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence.

To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older. If the home is owned jointly, both owners must be at least 62. Your home should be paid in full, or have a mortgage that can be paid from equity.

With most home loans, you could lose your home if you don't make your monthly payments. But with a reverse mortgage, there aren't any monthly repayments to make. So you can't lose your home by not making them. In fact, the home MUST be in and REMAIN in the name of the borrowers only. Most reverse mortgages require no repayment for as long as you, or any co-owners, live in the home.

Before taking a reverse mortgage for seniors, consider the following drawbacks:

High costs. Unlike conventional mortgages, which are based on the loan amount, fees for reverse mortgages are based on the value of your home or the limit on federally insured reverse mortgages in your area.

So, even as rising home values have increased the amount that homeowners can borrow through a reverse mortgage, they've also raised the costs.

Loan limits. The government caps the amount you can borrow through a reverse mortgage. The limits range from $200,160 to $362,790, depending on where you live. So even if your home is worth $800,000 and the HECM limit for your county is $362,790, the maximum loan amount will be calculated based on a home value of $362,790.

Many mortgage brokers and major lending institutions offer reverse mortgage products.

Before you can take out a reverse mortgage, you'll need to talk with a counselor approved by the federal Housing and Urban Development Department. Ask your counselor or lender to run through various scenarios using different interest rates, loan amounts and home values to figure out your leftover equity.

For more information on Reverse Mortgages available in your state, contact the National Reverse Mortgage Lenders Organization. They have lists of federally approved mortgage lenders categorized by states, and they will conduct a personal and confidential analysis of your request.

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