Reverse Mortgage

So what is it and how can it allow you to achieve financial freedom?

A reverse mortgage (or lifetime mortgage as it’s referred to in the UK) lets a homeowner convert their property’s equity into cash. Unlike a traditional home equity loan or second mortgage no repayment is required until the borrower no longer uses the home as a primary residence.

They allow homeowners who are 62 and older to convert equity into income, with the lender paying out via a lump sum, monthly payments or a credit line.

When the house is sold, the lender is paid back with interest and, typically, the homeowner never owes the lender more than the value of the property itself.

They have become very popular among older homeowners who need additional funds each month and do not have the ability to get them.

Some senior citizens find it hard to work or pay their bills as they get older and their property is the single biggest asset they have. A loan of this type is an excellent source of income to take some of the financial burdens off.

They are very easy to obtain if you satisfy a few basic criteria.

1. You must be at least 62 years of age

Most senior citizens are the ones who have the largest equity in their home. They are also the people with the most need due to lack of money coming in from a job or pension.

2. There can be no existing first mortgage

If there is a first mortgage on the home it must be paid off with some of the proceeds at the closing of the reverse mortgage loan.

3. The money can be used for any reason

Many people choose to take it in monthly payments to help offset cost of living expenses, but this is not mandated. This is an important point because people are living longer and they have different needs financially and health wise.

Older people do generally have more health concerns and this can quite often be the single largest monthly expense incurred. Others are very healthy and may just want to use the money available to them to spend on creating a better standard of living or to fulfill some of their lifelong dreams.

4. Bankruptcies slow down the process

The property must not be part of the bankruptcy proceedings, or it must be released before the reverse mortgage can be processed.

5. Mobile homes do not qualify

The property must be a permanent dwelling that can not be moved.

6. The borrower must complete a HUD approved counseling course

This is to protect both the mortgage company, but more importantly the borrower. They must understand that they are spending money against the equity in their home.

If this is a route you are looking to take it’s very important to educate yourself online before contacting any mortgage brokers so that you know exactly what to expect and are less likely to be knocked off track by a good sales pitch.

The internet provides many excellent sources for educating on the pros and cons of getting a reverse mortgage, a couple of which I have listed below

- Call AARP at 800 209 8085

- www.reverse.org

If you have any other specific questions regarding a reverse mortgage please contact me.