Reverse Mortgage- Revealed

A reverse mortgage is a special type of home loan for seniors provided by the Federal Housing Administration (FHA), through its Home Equity Conversion Mortgage (HECM) program, that allows seniors to use part of their home equity by converting it into cash. If you are senior living in your own home and have paid your home mortgage over the years, there is an equity built up on those payments, and this equity can be paid to you. You can avail of this program if you are a homeowner, 62 years of age, you own your home, your mortgage balance is low that can be paid with the proceeds of the reverse loan and that you are presently living in your home. These are the basic requirements of the FHA for you to be eligible in this program.

There is a great difference between the regular second mortgage and the reverse mortgage in the sense that the regular second mortgage requires you to have sufficient income enough to cover your liabilities to qualify for a loan. You will have monthly mortgage payments. In the reverse mortgage, it is available to you regardless of your income, it pays you and there are no monthly mortgage payments. The current value of your home, your age, the prevailing interest rate and the mortgage limits in your area assessed by the FHA, are the factors that determines the amount that you can borrow from the program.

As stated there are no monthly mortgage payments in the reverse mortgage. This is so because the loan is not due if you are still residing in your house which is your principal residence. However, you are responsible for paying the real estate taxes, insurance and other payments such as utilities, etc. just like the customary homeowner. There are no foreclosures in the reverse mortgage or forced ejection due non-payment of monthly mortgage. You do not have to make monthly payments during your stay in your house or anyone of your co-borrower if any. However, you have to keep your insurance and taxes up to date and, you must maintain your property regularly.

When the time comes that you decide to sell your property, the proceeds of the sale will repay the cash that you received from the reverse mortgage loan including the interests and other related charges and fees to the lender. If there is any equity remaining after all the payments and settlement, these will go to you and your heirs.

Incidentally, there is a requirement for your home to qualify for a reverse mortgage. Your home must be a single family home. In case it is one-to-four unit home, one unit must be occupied by the borrower. Condominiums units, town homes and manufactured homes that are approved by the HUD and meet FHA requirements are also eligible for reverse mortgage.

If there is one thing becoming popular with seniors in America these days, it is the Reverse mortgages. The trend is going in this direction because it is a reliable plan that caters to older Americans for their financial and social security. This can be a great means for seniors to add to their social security, cope with emergency medical expenses, and many more.




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