Reverse Mortgages: A Powerful Option for Senior Homeowners

In order to protect consumers, each reverse mortgage candidate is required to attend a free, confidential counseling session with a local independent housing counseling agency approved by FHA. File photo: Pixabay.

GREENWOOD VILLAGE, CO – More and more seniors are discovering that their standards of living can be enhanced with a Reverse Mortgage. They are finding out what it’s like to live worry-free again, how to enjoy their lives. Despite this there is still a lack of consumers education regarding Reverse Mortgages and many seniors have never heard of the concept.

The nameReverse Mortgage describes exactly what the mortgage is – it is the exact reverse of a conventional mortgage. That is, with a conventional mortgage the borrower pays the lender but with a Reverse Mortgage the lender pays the borrower. This may sound complex, but it really isn’t. In the past, a person in need of money would have to take out a loan against their house and immediately start making monthly payments again or sell their home. A Reverse Mortgage allows seniors to borrow against the equity they already have in their home and never make a monthly payment.

To qualify for a Reverse Mortgage, the borrower must be at least 62 years old and reside in a one family unit which has either already been paid for or is close to being paid for. Unlike conventional loans the borrower’s income and credit history are not a factor in determining their eligibility for a loan.

In order to protect unsuspecting consumers, each reverse mortgage candidate is required to attend a free, confidential counseling session with a local independent housing counseling agency approved by FHA. Candidates are encouraged to bring other family members with them to help in the decision-making process. This ensures that the borrower understands the program fully and aides the borrower in determining whether a Reverse Mortgage is something they should do. The program is based on three items: the age of the youngest borrower, amount of equity in the home and the interest rate. The older the borrower, the more money they will receive. Proceeds from the loan can be received in the form of a lump sum, monthly payments, a line of credit or even a combination of all.

The borrower can select whichever payment plan he\she needs and each one is designed so that no matter what the borrower’s needs are, they will be met. Also, the borrower has the freedom to change the payment plan even after the loan closes.

Reverse Mortgages are “due and payable” only when the borrower no longer lives in the home or fails to pay property taxes or other mandatory obligations. Should the borrower pass away, the estate can sell the home to pay off the Reverse Mortgage. If the borrower would like the house to stay in the family, this too can be accomplished, either by refinancing the loan or paying off the mortgage through other means. The federal government guarantees that the borrower will never owe more than the home is worth. If the loan is more than the market value the mortgage insurance makes up the difference.    

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