Reverse Mortgages a Big Interest for Seniors

Reverse mortgages are a hot topic in the market and Congress right now, as both seniors and the government try to manage the financial difficulties resulting from the dismal state of the economy. In fact, the government reports a 13.9 percent increase in reverse mortgage applications this year over last year.

Anyone interested in a reverse mortgage needs to do proper research and find qualified professionals to work with, such as a trusted lender, broker and/or realtor. This becomes increasingly important as the market for these kinds of mortgages grows and more lenders and mortgage professionals enter the market to take advantage of the demand.

A reverse mortgage enables older homeowners (age 62 and older) to convert the equity in their home into ready cash, without having to sell the home or take on a new monthly mortgage payment. Loan proceeds can be taken as a lump sum, a line of credit, a fixed monthly payment, or a hybrid of these. The amount of money one can borrow depends on the homeowner's age, the appraised value of the home, the current interest rate and the mortgage limits set by the Federal Housing Administration (FHA), among other factors.

Some key components of reverse mortgages:

• The home is the primary residence.
• Homeowners must pay off any existing mortgages with the proceeds from the reverse mortgage.
• The loan comes due when the homeowner sells the house, moves or passes away (or with couples, when the last remaining spouse passes away). Thus, the home will not be left free and clear for heirs. Heirs must repay the loan if they wish to keep the home.
• Unlike a home equity line of credit, there is no monthly payment on a reverse mortgage and, unlike traditional loans, reverse mortgages don't have minimum-income requirements. A reverse mortgage pays the homeowner, and is available regardless of current income or credit score.
• Reverse mortgages typically have closing costs (fees) higher than those associated with a traditional second mortgage or home equity line of credit. These fees are highly regulated by HUD and there are maximum fee limits that all reverse mortgage lenders and brokers must adhere to.
• Reverse mortgages also require that you maintain the home and pay property taxes.

Reverse mortgages can provide useful options for some, but it's important to keep in mind that the upfront costs associated with a reverse mortgage may make other options (such as a home equity loan, no-interest home repair loans, grants offered by the county government or a local non-profit, or a tax deferral program for individuals having problems paying property taxes) less expensive.


Don't let all the options and opportunities for reverse mortgages make you confused. You can review and compare the options through a free, no-obligation quote from Bills.com. Copyright ©, ARAnet, Inc.