Reverse Mortgages

As I reach the age of retirement, I am beginning to pay more attention to the offers that are directed toward seniors. The one ad that I seem to hear a lot about lately is the reverse mortgage option for us homeowners. So I began to investigate. Here is what I have found.

First, let us define the term reverse mortgage so we are all on the same thought wave. According to Wikopedia, a free encyclopedia on the internet, reverse mortgage is defined as "a loan mortgage to seniors 62 years and over, and is used to release the home equity in the property as one lump sum or multiple payments. The home owner's obligation to repay the loan is deferred until the borrower dies, the home is sold, or the owner leaves (goes to nursing home or assisted living)." Sounds pretty simple, huh? Now let us take a closer look to see what we can unfold.

To qualify for the reversed mortgage, the youngest borrower must be at least 62 years of age. The borrower(s) has to pay off on ay existing mortgages with the money received from the reverse mortgage.

There are no income requirements, or requirements on how to spend the money.

Those that apply for reverse mortgages are required to seek free counseling from a HUD approved loan counselor to make sure they understand the process.

The amount of money the applicants receive is based upon the appraised value of the home and the interest rate. The location of the home can also play a part in how much the loan will be. It is important to note that money received from the reverse mortgage will not affect any of the benefits from Social Security or Medicare.

It is also important to note that the borrower must be able to continue to pay their property taxes and keep up with homeowner's insurance. Some borrowers choose to have some of their money set aside in a type of escrow account to help pay for the property taxes and insurance in the future. Most borrowers, however, choose to be responsible for these two items on their own.