The ABCs of Reverse Mortgages

A Reverse Mortgage enables homeowners 62 and older to access the equity in their home without having to sell, give up title, or make any monthly repayments. The money received may be used for any purpose. It does not have to be repaid until the borrower moves out of the home permanently. Once the loan is repaid all remaining equity belongs to the borrower or the borrower’s estate (be careful, some lenders “share” this equity) Should real estate prices fall and the value of the home becomes less than the loan amount there is no obligation for the borrower or the borrower’s estate to make up the difference! My favorite Reverse Mortgage is called the HECM and is offered through the FHA.

Borrowers must be age 62 or older and occupy the home as a primary residence and there are no income or credit qualifications! The total loan amount available is determined by a matrix of the age of the youngest borrower, current interest rates, and the value of the home. You may receive the money in a lump sum, a monthly income for life, a Line of Credit, or any combination thereof. It is pretty much your choice, except any existing home loans must be paid off with the Reverse Mortgage. Remaining funds can be used for any purpose; they don’t have to be used for the house. Yes, there are closing costs; but these costs can be paid out of the money generated by the mortgage. The rate for all reverse mortgages is adjustable. Call for current rates.

The Reverse Mortgage is only due when the borrower no longer legally maintains the home as a primary residence. The loan may be paid via cash on hand, refinance, or sale. All equity in the property over and above the Reverse Mortgage amount belongs to the homeowner or the homeowner’s estate. Remember, if for any reason the value of the home is less than the Reverse Mortgage amount there is no obligation on the part of the homeowner or their estate to pay the difference! You may voluntarily pay all or part of the Reverse Mortgage at any time. Our in house expert on reverse mortgages is Richard Lockie.

Fixed Rates for conforming mortgages (under $359,650) on 07/19/05 (p.m.) are:
30 year fixed: 5.625% (a.p.r. 5.707%) payments are $2,070.35/mo.
15 year fixed: 5.25% (a.p.r. 5.39%) payments are $2,891.15/mo.