Reverse Mortgage Loan Blog

Since the economy has taken a downturn, more and more people are looking for ways to cut costs and save money.

One option that financial experts say is becoming popular is the reverse mortgage, which gives people on a fixed income extra money to help pay the bills.

A reverse mortgage basically allows a homeowner who is over the age of 62 to convert their home equity into income without ever moving or selling their property.

Homeowner Carol Whitton is paying a lot to have her property “maintenance free” for when she gets too old to work.

“When I came up here, I was trying to find a job. There was no jobs because I was in the mortgage business for ten years. Nobody was paying. You know, the mortgage business was going down,” said homeowner, Carol Whitton.

Like many seniors, Whitton decided to sign up for a reverse mortgage so, she wouldn’t have to worry about not making her monthly payments.

“I love it. If I didn’t have to go back to work. I didn’t have to worry that I couldn’t meet my bills because with social security and what I get every month, I am fine,” she said.

Through a reverse mortgage, a homeowner gets tax-free money back from the lender, in the form of equity.

“The benefit is an additional income stream. It’s an income stream that doesn’t affect their social security. It does not affect Medicare,” said loan officer, Jack Langley of Gershman Mortage.

Langley says the plan is commonly used to payoff existing mortgages, eliminating a person’s monthly payment obligation.

“It seems like we’re getting a lot more calls about the reverse mortgage because people have had their IRA’s, retirement accounts. They’re seen them dwindle with what’s happening with our economy,” he said.

So what happens if Whitton moves or dies while living at her home? She or her heirs will have to put the house up for sale to pay back her reverse mortgage, with interest. They normally have up to a year to sell the property.

“It’s just simple to do. You would just say okay this is Carol, okay I got about thirty minutes over the phone for my counseling. They send me my certificate, I sent it in, they send someone over here to help me fill out paper work. I sign it and in less than thirty days I get my money. It was easier than when I bought the home,” said Whitton.

Homeowners can get their money in a lump sum or monthly installments. Homeowners do have to pay a two-percent premium for mortgage insurance which insures the lender will get money and the borrower will never owe more than what the home will sell for.

Borrowers have to pay for closing costs which typically include an appraisal, recording fees, title search and insurance.

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