Age is an advantage for a reverse mortgage
I seem to be getting more and more questions about reverse mortgages from friends, neighbors and relatives. Maybe it’s because of the high percentage of seniors who call Florida home. Maybe it’s because more people in my personal circle are becoming senior citizens, or maybe it’s because of the economic downturn. Whatever the reason, reverse mortgages are the current hot topic.
If you don’t know what a reverse mortgage is, basically it is a special type of home loan that lets you convert a portion of the equity in your home into cash. This equity is then paid to you monthly rather than the traditional loan procedure of you paying the lender.
A reverse mortgage differs from a conventional home loan in that it pays you regardless of your current income, with the amount borrowed based on your age, current interest rate, appraised value and amount of equity. Generally, the more valuable your home is, the older you are, the lower the interest and the more you can borrow.
To be eligible for a reverse mortgage you must be a homeowner who is 62 years of age or older, own your home outright or have a low mortgage balance. The property must be owner occupied and must also be your primary residence. The home can be a single family home; a one- to four-unit home, as long as one of the units is occupied by the borrower; a condominium; or qualified manufactured home.
As long as one of the borrowers continues to live in the house and maintains the taxes and insurance, you will never outlive the loan. Since you never can owe more than the value of the home, when you or your estate sells the home, cash received from the reverse loan will be repaid along with interest and other fees. Any remaining equity belongs to you or to your heirs.
Monthly payments are paid through a variety of options: equal monthly payments as long as the property is occupied, equal monthly payments for a fixed period of months, line of credit to withdraw from on an unscheduled basis, combination of line of credit and monthly payments for a fixed or open length of time.
The U.S. Department of Housing and Urban Development (HUD) is now offering reverse mortgages for the purchase of a home as well as for converting the equity in your current home into cash. Seniors can now purchase a new primary residence using cash on hand and equity from the sale of a previous home to establish a reverse mortgage on the new property.
This is great news for homeowners who may be interested in a reverse mortgage but are currently living in a home that is not suitable for their needs as they grow older. It will give them the option of selling their current residence and then purchasing a smaller or more appropriate property and still apply for a reverse mortgage.
HUD’s Web site, www.hud.gov, provides information on its reverse mortgage programs as well as contact information for reverse mortgage counseling, approved lenders and a reverse mortgage calculator.
Right now Florida is a better place to retire than ever before with incredible housing values and no state income tax. In addition, the banking crisis does not appear to have affected the reverse mortgage market for those interested in obtaining a reverse mortgage. Getting old does have some advantages and a reverse mortgage is right up there along with no alarm clocks, sunshine and never ending senior discounts.
