Reverse mortgages can be a life saver for retirees but they are also tricky and need to be studied carefully before decided upon. Many retirees know all to well that pension, social security and other small incomes don’t always make ends meet or keep you at the lifestyle to which you’re accustomed. A reverse mortgage can be just the tool to restore your level of comfort.
In a reverse mortgage, a homeowner over the age of 62 can borrow from their home’s equity. The loans principal and interest are not due until the homeowner dies or moves out. Reverse mortgages have become more and more popular recently as the long bear market has squeezed the finances of America’s retirees. It is important to check out all the possible options and speak extensively with a mortgage specialist before deciding on a reverse mortgage. They are complicated and can also be expensive if not used for long terms.
Reverse Mortgage Options
There are several types of reverse mortgages to consider. The Home Equity Conversion Mortgage (HECM) is the most popular reverse mortgage product. It has been in place the longest and is the most trusted option. It has been available since 1989 and is insured by the federal government through the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development.
Another type is the Home Keeper reverse mortgage. In 1996, Fannie Mae developed its own proprietary Home Keeper reverse mortgage to supplement the federally insured Home Equity Conversion Mortgage.
There is also a “jumbo” proprietary reverse mortgage product called Cash Account developed by Financial Freedom Senior Funding Corporation, based in Irvine, CA.
One of the most often asked questions concerning a reverse mortgage are surrounding the qualifications. Many prospective consumers want to know if there are any medical or income pre-qualifications for the reverse mortgage. The answer is no, there aren’t any income or medical requirements to qualify. You may even be eligible for a reverse mortgage if you still owe money on a previously existing mortgage. One stipulation here however is that you must qualify for a large enough reverse mortgage to pay off the existing loan in its entirety.
Recent federal and state laws have been put in place that require elderly homeowners to get professional advice before taking out a reverse mortgage is making the deals less risky but it is still a good idea to get a few quotes before choosing a lender.