Information on Reverse Mortgage
Selecting the right Reverse Mortgage
will hopefully give you greater financial independence and
reassurance during your golden years. However, selecting the wrong
plan could lead to financial disaster. Here is some helpful
information on reverse mortgage:
1. What is a reverse mortgage?
A Reverse Mortgage is a widely known and
residential mortgage loan just for senior homeowners. It is not
required of you to make monthly payment loans if you get the
approval for a Reverse Mortgage. A typical reverse mortgage is
repaid in case of death, selling of the home or if you move out
permanently. This repayment is made from your home's equity at the
time of selling. You, or any of your inheritors are allowed to keep
any sales proceeds from your home in excess of what you owe the
A reverse mortgage is thus a special type of
home loan that lets a homeowner transform a part of the equity in
his or her home into cash. The equity built up over years of home
mortgage payments can be paid to you. But unlike a second
mortgage or traditional home equity loan, no repayment is necessary
until the borrower(s) no longer use the home as their principal
residence. Reverse mortgage offers these benefits, and it is also
2. Who can qualify for a reverse mortgage?
To qualify for a Reverse Mortgage, you must be
a homeowner who is at least 62 years old. It is customary that you
should own your home outright, or have a low mortgage balance that
can be paid off at the closing with proceeds from the reverse loan;
and must live in the home. You are further required to receive
consumer information from authorized counseling sources prior to
acquiring the loan. It is compulsory to repay the loan of your
mortgage either in full or almost in complete. Generally, the amount
you can borrow depends on the amount of equity you have in the home,
the value of your home, and your age at the time of loan
For example, one of the many reverse mortgage
plans available would permit a seventy-year old homeowner with a
home worth $200,000 to borrow $73,201. A ninety-year old homeowner
would be able to borrow $210,573 under the same plan.
3. Can I apply if I didn't buy my present
house with mortgage insurance?
Yes. While your property must meet minimum
property standards, it doesn't matter if you didn't buy it with an
insured mortgage. Your new reverse mortgage will be a new insured
4. What types of homes are eligible?
Your home must be a single-family dwelling or
a two-to-four unit property that you possess and occupy. Detached
homes, townhouses, units in condominiums are eligible. It is
possible for condominiums to qualify under the Spot Loan program.
The home must be in reasonable condition, and must meet minimum
property standards. In some cases, home repairs can be made after
the closing of a reverse mortgage.
5. What's the difference between a reverse
mortgage and a bank home equity loan?
With a conventional second mortgage, or a
home equity line of credit,
it is compulsory to have enough income in comparison to the debt
ratio in order to qualify for the loan, and you are required to make
monthly mortgage payments. The reverse mortgage is different in that
it pays you, and is available regardless of your current income. The
loan you apply for depends on the interest rate, other fees and the
appraised value of your home or mortgage limits for your area,
whichever is found to be less and also your age. In short, the more
valuable your home is, the older you are, and the lower the
interest, the more you can borrow. You don't make payments, because
the loan is not due as long as your house remains the principal
residence. Similar to any house owners, you are liable to pay your
real estate taxes and other additional payments like utilities, but
with an insured Reverse Mortgage, you cannot be foreclosed or forced
to vacate your house because you "missed your mortgage payment."
6. Can the lender take my home away if I
outlive the loan?
No, he cannot, even if the loan is due. You do
not need to repay the loan as long as you or one of the borrowers
continues to live in the house and keeps the taxes and insurance
current. You can never owe more than your home's value.
7. Will I still have an estate that I can
leave to my heirs?
In case you sell your home or no longer use it
as your primary residence, then you or your estate will have to
repay the cash of reverse mortgage along with interest and other
fees to the lender. The equity left in your home (if any) after the
loan is met, belongs to you or to your heirs. None of your other
assets will be affected by reverse mortgage loan. This debt will
never be passed along to the estate or heirs.
8. How much money can I get from my home?
The loan you apply for depends on, the
processing fees, the present interest rate, other loan fees and the
appraised value of your home or mortgage limits for your covered
area, whichever is found to be less and also your age. In short,
the more valuable your home is, the older you are, and the lower the
interest, the more you can borrow.
9. Should I use an estate planning service
to find a reverse mortgage?
A firm that will give you the name of a lender
for a “small percentage” of the loan may have contacted you. It is
not recommended to use an estate planning service, or any service
that charges a fee just for referring a borrower to a lender! The
information is generally provided without cost, and approved housing
counseling agencies are available for free, or at minimal cost, to
provide information, counseling, and free referral
10. How do I receive my payments?
You have four options:
Modified Tenure - combination of line of
credit with monthly payments for as long as the borrower remains
in the home.
Term – In a fixed period of time the borrower
has to make equal monthly payments
Line of Credit
- in installments or unscheduled payments, and also in amounts
of borrower's own choosing until the line of credit gets
Modified Term - combination of line of credit with monthly
payments for a fixed period of months selected by the borrower.
Suvadip Das is a
research fellow in management and at the same time a web developer.
Web design is his passion. He has worked for Freelance Writer
Organization and various websites including
His credentials include writing keyword enriched articles.