Reverse Mortgages in a nut shell

Reverse mortgages are really a viable option for people over 62 years old. The loan program has been around for a long time but hasn’t gained popularity until recently. In the awake of the sub-prime crisis many people are left with loans that they can’t pay. Now if they are 62 and older and have good amount of equity in their property they can qualify for a reverse mortgage. How many senior citizens can’t afford their home anymore due to rising cost of living and interest rates and are struggling to pay their house payment with fixed income? That’s were reverse mortgage really can help because it eliminates the mortgage payment entirely. There are several different loan programs available for reverse mortgages. Some programs are government insured and some are the lender’s own reverse mortgage programs. No income or assets are verified for reverse mortgages, not even credit score. The qualifications are the person’s age (minimum of 62 or older), the amount of equity and the condition of the property. The reverse mortgage can offer the borrower a lump sum at closing, a credit line or a set amount that is going to be disbursed over time as requested per the borrower. Regardless of what option the borrower chooses, there won’t be any mortgage payments for the life of the loan. The borrower is responsible for paying for the insurance and the taxes on the property as well as maintaining the property in good condition.

There are some lenders that do reverse mortgages that have recourse and some that don’t, so you want to be careful as to who you are dealing with.

Qualifications for a reverse mortgage:

• Age (minimum of 62 or older)
• Low LTV (loan to value), need equity
• property in good condition

Benefits of a reverse mortgage:

• no payments for the rest of the borrower’s life
• non-recourse loan (borrower is not forced to leave the house or sell it and won’t owe more than the property is worth)
• some lender’s reverse mortgage can have recourse however so you want to be careful
• several loan options available (lump sum, credit line, income stream over a set-time period)
• borrower can use the proceeds however he wishes to better his quality of life and won’t have to worry about mortgage payments as long as he is alive and keeps the mortgage and doesn’t refinance or sell the property

Copyright Reija Eden