Reverse Mortgages: What Is The Deal?

More people are becoming concerned that their benefits will not last, due to the looming Social Security crisis; you can definitely understand the stress level of the 41 million people, who are now aged 50 to 60. There is a genuine concern over whether or not they have saved and invested enough money to retire. Many Americans are now familiar with the term “reverse mortgage”. The way the system works is still mysterious to many people. A concern is how hazardous reverse mortgages are for seniors who sign up.

This article outlines the reasons for a reverse mortgage and how to use them. Where did the reverse mortgage originate? Federally insured reverse mortgages, sometimes known as home equity conversion mortgages, began in 1989. Although many seniors are entitled to use their qualifying home equity, it is estimated that only approximately one percent of those who are eligible have put them into place. The last few years has shown the most growth when it comes to the home equity conversion mortgage market.

How Does the Reverse Mortgage Perform? Qualification age is 62 years, first of all. Second, you must be residing in your “primary residence”, and the equity in this home will become a key factor. The more money your home is worth and the older you are, you are eligible for a higher amount. You can get varying amounts. You can choose to get the money all at once upfront, have an open line of credit that is accessible, as needed, a fixed monthly payment that is designated over a period of time or some combination of these.

The threat of foreclosure is not possible since there are no pending loan payments to make. You will need to make sure that you are taking good care of the property to keep up its value and of course all taxes and insurance must be current. You will only be required to pay the reverse mortgage when you either sell your house, reside away from your home for longer than a year, or on your death (or that of the last surviving borrower). When you die and your heirs sell the house, they repay the lender from the proceeds.

How about the Money? An appraised value for your home is used for a reverse mortgage and is ‘capped’ at the median home value for the specific county in the state in which you reside. The Fannie May sponsored ‘home keeper’ program was, and may still be, at $417,000. If your house is valued at an even higher price, you may choose to borrow an amount up to the limit allowed. The lump sum amount is likely a bad idea if you wish to save on accruing interest charges. It would be preferential to have the option of taking monthly payments or a line of credit.

The following will help you understand the safety valves First, without screening, it is impossible to get a reverse mortgage. You are required under federal law to have a consultation with a HUD-approved counselor either in person or by telephone before applying for the loan if you are considering a reverse mortgage. Additionally, some equations will have to be checked. In order to qualify, the appraised value of your home needs to be high enough in comparison to the mortgage you are currently holding. You will likely qualify, however, if the ratio of equity to value is favorable, this can be figured out by meeting with a HUD-qualified counselor. Weigh Your Options You may want to think about a customized analysis template that has been produced by AARP. To see if your home is under the FHA limit in your county you can put your age, the approximate value of the home, and the zip code into an online calculator.

Marie Bjornson, branch manager of Fairway Independent Mortgage, specializes in helping to show her clients their hidden retirement account. You can confidentially contact her at (360) 676-9600 or at Marie@Wa-mortgage.com.