Is a Reverse Mortgage for You?

Today’s market on housing is going asunder. So what does that mean for those that have put many hard years into their homes?

For those borrowers that are 62 or older, it means that there is something they can do. Reverse Mortgages are a great solution. Also known as Home Equity Conversion Mortgage or HECM. First of all, do your homework on the company that is going to bail you out. The safest are HUD/ FHA. There are a lot of companies looking to give you only the bare minimum and often falls short of the payment that is due. The whole idea of a reverse mortgage is that you get to stay in your home and don’t have to pay back the money unless you move out of your home.

You can chose to receive your payment in different ways to suit your needs best. It could be a lump sum payment, monthly, or as a credit line that let’s you decide how much and when you need that extra cash. Some reverse mortgages allow you to combine payment options. But you do have to be careful with the credit line because there are usually set amounts that will “lend out” at a certain point.

Also you should be aware that with a reverse mortgage, you could have what’s known as rising debt, and falling equity. Basically with reverse mortgage, you are taking out the cash value on the equity that has been built up. So your debt rises and your equity falls. You see you don’t have to pay back a reverse loan, but your lender is steadily sending you money that you owe. It goes off into la la land and adds to your debt. Make sense? in other words, this still counts as money owed.

There are a few exceptions to this rule. If your home value increases, than you can gain equity. So if you decide to sell, there won’t be as much loss. The good news, is you can never owe more than the value of your home. So the most you will owe if you sell is the price the home sells for.

Depending on your type of loan, there are special insurance fees that are usually due at closing as well as to be paid each year with the reverse mortgage. So it’s important to ask as many questions as possible. You may want to consider getting one of your children or someone who is familiar with your finances to sit in with you as the loan is discussed to decide if a reverse mortgage is right for you.

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