The Reverse Mortgage

Many aging Americans have heard about a useful financial planning tool, the reverse mortgage. This mortgage is provided to allow individuals 62 years old or older to draw equity out of their existing homesteads.

There are a number of stipulations and regulations that govern reverse mortgages. They are primarily designed to aid seniors that have substantial equity in their homes and desire to draw part of that equity out as regular cash payments.

Types of Reverse Mortgages

There are four basic types of reverse mortgages available today. These include:

1. Proprietary or jumbo reverse mortgages. These are somewhat rare and are used for seniors who are younger or need to deal with larger loan amounts in their reverse mortgage.
2. Special or single purpose. As opposed to the jumbo mortgages, these are primarily subsidized mortgages for low income individuals. They often help to deal with property taxes and essential repairs.
3. The Home Equity Conversion Mortgage (HECM) Saver Option. This is a smaller version of the standard HECM program.
4. Home Equity Conversion Mortgage. This is the basic option is a program insured by the FHA and administered by HUD. This category encompasses over 90 percent of the total reverse mortgages that are in existence.

Using Reverse Mortgage Proceeds

Part of the advantage of the use of a reverse mortgage is in the flexibility of using the proceeds it can provide. An individual can choose to receive monthly payments for a period of time or for life. Alternatively, the proceeds can be taken as a lump sum or to set up a line of credit to be used when desired. Of course, there is the option to set up a combination of these ways to access the proceeds of a reverse mortgage.

Advice and Education

Because of the complexities and options dealing with reverse mortgages, there is a process of education that is involved. There are trained counselors who serve to review all the details of the programs and work to ensure that potential borrowers are aware of all the issues involved in the process.

Of particular importance is understanding the issues of ongoing payments of taxes and repairs. Participants in reverse mortgages retain ownership of their homes and have ultimate responsibility to maintain it and the taxes that come due.

Counseling will also help the homeowner understand the amount of money that can be borrowed against their equity. FHA loan requirements apply and in reverse mortgages the ultimate value of the note may remain unknown until the final note is disposed of.

Qualifying for Your Reverse Mortgage

The good thing about a reverse mortgage is that it is easy to qualify for if you are a senior over 62 years old and have substantial equity in your home. Contacting a qualified and approved HEMC lender will provide a quick and easy introduction into the process of setting up a reverse mortgage.