The Need
Why would someone need a reverse mortgage? Homeownership has typically been used to generate equity, creating wealth for millions of consumers. If you ever needed to get cash from your home, you would have to borrow against the home by using a home equity loan or you would have to sell the house. Many older homeowners have a substantial amount of equity in their homes; however they may not qualify for the typical home equity loans because they do no have the income sources to make the monthly payments. A reverse mortgage provides a third option for homeowners and gives them another financial choice. For senior homeowners, this choice could help provide supplemental income, may help you remain in your home, giving you the means to live independently for a longer period of time.
A Reverse Mortgage Explained
A reverse mortgage is a special loan for homeowners who are age 62 or older. Reverse mortgages were first established by the Housing and Community Development Act of 1987, as part of the U.S. Department of Housing and Urban Development (HUD).
What is a Reverse Mortgage?
A reverse mortgage is a loan borrowed against your property’s value. This loan continues (without any monthly payments from you) as long as you: Live in the home are your primary residence. Make necessary home repairs. Pay your property taxes and home owners insurance. This loan then is a loan in reverse. The lender pays you, allowing you to turn the value of your property (single family home; condos and manufactured homes, etc.) into cash. You or your estate will repay the loan in full, including all interest and other charges when the last living borrower passes away, sells the home, or permanently moves to a new residence. As you can tell, a reverse mortgage is very different from a traditional mortgage. To qualify for a traditional mortgage the lender checks your income and assets to see how much you can afford to pay back. But with a reverse mortgage you are not required to make monthly repayments, so qualifying for the loan could be easier for you as a consumer.
