Reverse Equity Mortgages for Seniors

Reverse equity mortgages are becoming popular in America. They are a special type of home loan that lets a homeowner convert the equity in their home into cash. Reverse mortgages are commonly compared to bank home equity loans and second mortgages. Bank reverse mortgages are quite a bit different from other types of debt.

Reverse equity mortgages have been around for years, but it wasn't until the early '90s that they began earning respectability after the Federal Housing Administration started insuring the mortgages for repayment to lenders. Personal reverse mortgages are only available to people that are 62 or older. Many seniors are using them as a way to supplement their retirement. This is could be an ideal situation for someone that is "house rich and cash poor."

Reverse mortgages can most closely be compared to home equity loans or home equity lines of credit. It is not necessary to be employed to qualify for a reverse mortgage. These mortgages can be quite complicated and the lending institutions require you to under go counseling. Reverse mortgages are a way of drawing the equity out of your house and it is important that this fact is understood.

Reverse mortgages are usually paid out in one of three ways. They can be paid as monthly payments, a lump sum or can be made available as a home equity line of credit. Unlike most home equity loans where the money is usually used to pay debt, for home improvements or education, there are no restrictions on what can be done with the money. It can be used for anything.

A reverse mortgage is not repaid the same as a traditional mortgage. It is repaid upon the death of the owner, the sale of the home or when the owner moves. If there is a difference in the value of the home and the amount that has been paid out by the mortgage company, that amount is returned to the owner or his or her estate.