Why More and More of San Diego's Seniors Are Taking Out Reverse Mortgages

Reverse Mortgages are one of the hottest products in today's mortgage industry. In San Diego, in particular, fourteen times as many seniors took out Reverse mortgages in 2006 than did 5 years earlier in 2001. With the rising costs of living and healthcare, tapping into the equity of their home is often the only way many seniors can maintain their standard of living. They are referred to as being "cash-poor but home rich". Here's why they are increasingly popular, especially in Southern California.

What is Reverse Mortgage?

A reverse mortgage is a loan taken out on your home that you do not have to repay for as long as you occupy it. Contrary to the typical mortgage loan, with a reverse mortgage, the loan company makes payments to you rather than you paying the mortgage company.

The lending institution will make its money back with interest and other charges when you die, sell the home, or permanently move out. As the borrower, you will still hold the deed to the home, and will still be responsible for insurance, property taxes and general upkeep of the property.

How do you qualify for a Reverse Mortgage?

To get the benefits of reverse mortgage, you must meet certain criteria that are listed below:

You must be at least 62 years old
You must own and occupy the home as a principle residence
If you have single family one-unit dwellings (however, in some cases, 2-4 unit owner-occupied dwellings are also considered but with certain terms and conditions)

How does it differ from a regular mortgage?

The primary difference is that no monthly repayment is required for as long as you occupy the home. Secondly, you do not need an income to qualify for a reverse mortgage. Reverse mortgage frees you from both those restrictions.

Since you do not make payment each month, the loan amount increases with time. However, you can never get to owe the lender more than your home's value.

How is a Reverse Mortgage paid out?