Reverse Mortgage Loan Blog

If you are a retiree who has a lot of equity tied up in your house, but can’t find money for needed repairs; a reverse mortgage could be the solution to your problems.

The reverse mortgage can provide monthly payments or a line of credit to be used as needed. Some people like monthly payments to improve cash flow. Others opt for the line of credit that will give them the money for unexpected expenses — like house repairs or medical bills.

The Home Equity Conversion Mortgage program (HECM) is insured by the Federal Housing Administration (FHA) and has been around since 1991. It enables a homeowner over 62 to borrow against the equity in his or her home and repay the loan only after the home is sold or no longer the borrowers primary address.

The reverse mortgage program originally was created to help cash-strapped senior citizens stay in their homes longer, but it can serve other purposes as well. Some seniors find it makes sense to use a reverse mortgage on their primary residence to finance the purchase of a second home.

The amount of money available through a reverse mortgage depends on the senior’s age, home value, interest rates and the local FHA lending limits. A two percent upfront insurance payment guarantees that the owner will never have to pay back more than the equity in the property, regardless of how much money is borrowed or what happens to the real estate market.

The federal government sets the fees and interest rates, but seniors still need to determine if a reverse mortgage is a good deal for their situation. The upfront costs and interest rates are generally higher than for a mortgage.

The FHA requires that seniors interested in a reverse mortgage to talk with an independent counselor before the loan can be set up.

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