An Overview Of Reverse Mortgages

By Graham McKenzie

Financial uncertainty is a way of life for many seniors today. Their dreamed of retirement is often cut short by reality. Seniors have fixed incomes and day to day living expenses are steadily rising. They worry about the future and often ask questions at their financial institution about help to manage their finances. Income boosting alternatives are few. One way to help boost income is a Home Equity Conversion Mortgage (HECM), known as a Reverse Mortgage. Financial employees who are familiar with Reverse Mortgages can help customers by providing them with income boosting alternatives.

A Reverse Mortgage is a loan that allows seniors to boost their income by converting a portion of the equity they have built in their home into cash. This cash is not taxable and typically it doesn't interfere with eligibility for Social Security or Medicare benefits. The exception is the federal Supplemental Security Income Program, where beneficiaries must keep their liquid resources under certain limits.

Title to the home and any appreciation in value remains the seniors property when the loan is paid off. The loan remains in affect until the last titleholder dies or permanently leaves or sells the home. The borrower can not be forced to move or sell the property. The loan can be paid off at any time. One of the benefits of a Reverse Mortgage over traditional loans is no monthly payment requirement. A Reverse Mortgage can free a senior of monthly mortgage payments and ease some of the money worries day to day living causes.The FHA insures and guarantees most Reverse Mortgages today so they are subject to FHA lending limits. Proprietary products have been developed to help homeowners in excess of these lending limits.

There are a few qualifications for a reverse mortgage. Every title holder must own a home with some equity, and be 62 or older; there aren't any income or credit filters. Current mortgages or liens must be paid off, but this is often accomplished with the proceeds from the reverse mortgage. The homeowner is required to remain current on insurance and property taxes, but these can also be paid with the reverse mortgage proceeds.

A reverse mortgage borrower has no restrictions on how the monies can be used. Here are common uses for these funds:

- Mortgage loans and credit cards

- Remodeling projects or other home improvements

- Day to day expenses

- Vacations and travel

- Health care

- Assisting children with financial obligations

- Taxes

- To fund hobbies

- To defray the rising cost of property taxes

Once the borrower gets his money out of Reverse Mortgage, he is at liberty to use the money for his day to day living. However apart from this spending, the borrowers have the history of using this money towards, payment of debts, mortgages, or credit cards. They can also use this money for home repairs, travel, education for children, taxes, healthcare and more. The reverse mortgage money is in proportion to the age of the borrower, the value of the property, interest rates and FHA lending limits. Elder by age, means more money. The money could be received in lump sum or other modes such as monthly payment or line of credit.

However the borrower has to meet certain expenses to get this reverse mortgage money such as origination fee, closing costs, insurance in case of HECM etc. Before obtaining a reverse mortgage the borrower need to sit with a Reverse Mortgage counselor to submit details of his financial situation and get a training to understand the Reverse Mortgage transactions. - 31382

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