Reverse Mortgages Are Not Boring...

Reverse Mortgages Are Not Boring...

Amy Catling, C.S.A.
GIA Mortgage
1-800-476-2858 or 1-207-251-0633
acatling@seacoastreversemortgage.com

Reprinted with permission from The Senior Times newspaper

...but sometimes going over the basics of a reverse mortgage can sound a little bit dull! It must be all that government language. The exciting thing about reverse mortgages, however, is what they can do to significantly improve the lives of people over 62, so it's crucial for boomers and others to fully understand how they work.

Simply put, a reverse mortgage is like a home equity line of credit with deferred payments. Your home's appraised value, your age, and the current interest rate will all influence the size of that line of credit. Unlike a traditional home equity line, no payments are required on a reverse mortgage as long as at least one borrower is living in the home. Since no payments are required, there are no income qualifications for a reverse mortgage.

To be eligible for a Federal Housing Authority (FHA) reverse mortgage, the FHA requires only that you be a homeowner 62 years of age or older, own your home outright, or have a mortgage balance that can be paid off at closing with proceeds from the reverse mortgage, and the home must be your primary residence for the majority of the year.

Eligible homes must be a single family or a 1-4 unit home with one unit occupied as your primary residence. Housing and Urban Development-approved condominiums and manufactured homes that meet FHA requirements are also eligible. All reverse mortgages within the federal program are insured by the FHA.

Unlike a traditional mortgage or home equity line of credit, the reverse mortgage borrower can never face foreclosure due to missed payments (because there aren't any payments!). Like all homeowners, you are still required to pay your real estate taxes and insurance. Abdicating those responsibilities, or allowing the home to fall into disrepair, are the only “triggers” for foreclosure with a reverse mortgage. Other than that, the reverse mortgage lender never owns the home, just as the lender never owns the home when you have a regular mortgage.

Your reverse mortgage line of credit (or lump sum if you prefer, or any combination of the two) can be used for anything you want or need.

Not too bad so far, is it?

It's right about here that people usually start to listen for the sound of that other shoe dropping, so let's get right to the shoe. No, reverse mortgages aren't “free money”. If they were, no lenders would offer them! Interest accumulates over time, but only on what you actually use. If you have a credit line of $100,000 but only used $20,000, interest would accrue only on the $20,000. No matter what, you can never owe more than the value of your home at the time you or your heirs sell the home, so you can never pass on debt from a reverse mortgage to your heirs.

To ask specific questions about how a reverse mortgage may fit in with how you would like to live in retirement, you can reach Amy Catling at 1-800-476-2858 or 1-207-251-0633, or by email at acatling@seacoastreversemortgage.com.

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