Reverse Mortgages

Reverse mortgages are gaining increasing popularity among seniors 62 and older. For homeowners that have significant equity in their home, taking out a reverse mortgage is a great way for them to tap into the equity of their home without the hasels of qualifying for a traditional mortgage and without the worry of having to make monthly payments.

Reverse mortgages work the opposite way that a traditional amortizing mortgage does. Rather than sending a payment to the lender every month, the lender pays the individual. There are 4 ways the payments can be arranged including a lump sum, fixed monthly payments for as long as you remain in the home, line of credit (which can be access whenever it is needed), or a combination of monthly payments and line of credit. According to National Association of Reverse Mortgage Lenders, the income received is not considered taxable income and does not effect your social security or Medicare benefits. If you receive a lump sum payment, however, it could effect your Medicade eligibilty so you are encouraged to consult a Medicade advisor.

So how much money can you expect to get?

The answer to that depends on Four factors:

Your age The value of your home according to an appraisal The amount of equity you have (subtract current mortgage from appraised value) The interest rate when you take out the loan

Because reverse mortgages are just beginning to gain popularity, there are many misconceptions that surround them. The first is that the home must be owned free and clear before a reverse mortgage can be taken out. While the amount of equity you have is a factor in determining how much money you can expect, the only requirement is that any proceeds of the reverse mortgage must first be used to pay off any current mortgage that you have. The second misconseption is that when you take out a reverse mortgage you have to sign the title over to the bank. In fact, you retain title throughout the life of the reverse mortgage and are only required to pay the loan back when you permanently move out or when the home gets passed to your estate. At that point, the home can be sold to repay the loan or the home may be refinanced back to a conventional mortgage in order to pay the reverse mortgage back.

For much more information please contact www.reversemortgage.org.