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As the population of America ages, reverse mortgages become more popular. The
Housing and Urban Development (HUD) through the Federal Housing Administration
(FHA) brought America’s attention to their program the Home Equity Conversion
Mortgage (HECM) the first in the nation. This program has given many older
Americans much more financial security. It will in effect, supplant their social security
payments, help them meet unforeseen medical expenses, and even enable them to
have the cash to make home improvements that bring their homes closer to the
homes they desire to live in during their “golden years.” Being able to cash in on
what is usually their largest single investment has thoroughly brought tremendous
peace of mind to many elderly.
The reason it is referred to, as a reverse mortgage is that the equity that the elderly
have undoubtedly built up in their homes, now allows them to convert that equity into
cash that will be paid out to the homeowner. Put in a better way, a reverse mortgage
pays you to live there! How does reverse mortgage work? Well, to be entitled to
receive an FHA HECM, you must be a homeowner aged 62 or older. You will have to
either own your home outright, meaning it’s paid off, or you may have a low
mortgage balance. If there’s a balance, it will be paid off at closing using the
proceeds from the HECM. Finally, you must live in that particular home.
To qualify, the home itself can be a single family home, or it can be a one to four
unit home, as long as you occupy one of the units. Also, HUD-approved
manufactured homes and HUD-approved condos will also allow you to have an FHA
HECM. If, instead, you were to receive a second mortgage, or you received a home
equity line of credit, you would have had to have sufficient income against that debt
ratio in order to qualify for that kind of loan, plus you would then be required to
make monthly mortgage disbursements or payments, as you’ve always done with
any other mortgages. The FHA will instead of looking at your income, look at your
age, the appraised value of the home, the current interest rate, and such. In general
the older you are, the more valuable your home is, and the lower interest rates are,
the greater amount you may be allowed to borrow. The loan does not become due
as long as you are able to reside in that home, using it as your principal residence.
You will of course still be responsible for your utilities, and insurance as well as
paying the real estate taxes. If your home is a condo, you will also need to pay the
maintenance fees. Since there is no mortgage payment to be made, you will never
be foreclosed on, as there’s no payment due. Also money received thusly is tax-free.
The lender can never take title to your home until you can no longer reside in it!
The cons of such a loan are almost negligible. There are origination fees associated
with the loan, the FHA upfront mortgage insurance (MIP) plus other closing costs. If
you should sell the home, you might not afford another home to live in. At times,
variable rates are used to create the loan, though that may be negotiable.
Home Loans Made Easy Online found at homeloansmadeeasyonline.com can help
seniors with reverse mortgages nationwide in all 50 states by putting then in touch
with national reverse mortgage lenders.