Reverse Mortgages, a Safety Net for Senior Citizens

Apr 11th, 2010 | By | Category: Senior Finances

Reverse mortgages are becoming a hot item for America’s senior citizens.  The Federal Housing Administration created a RM program early on (a number of years ago) in which senior homeowners withdrew some of the equity in their home as a means of gaining greater financial security. 

Seniors use the plan to supplement social security, handle medical expenses and make improvements in their home, just to name a few of the reasons this choice is made.  So what is a reverse mortgage?

RMs are special kinds of home loans that let you convert part of the equity in your home into cash.  The uniqueness of this kind of loan is that the borrower (senior citizen) doesn’t have to repay the loan as long as he/she/they live in the home as their primary residence.  The senior has to be 62 years old, owns the home with no mortgage or has a low mortgage balance that can be paid off with proceeds from the RM.  The senior(s) must live in the home.  It has to be a single family home or up to four units in a home, with the borrower living in one of the units. 

The RM is a good option for some senior citizens because it pays you, rather than you paying a bank or lending institution. You do not have to qualify in terms of income levels.  The amount you can borrow is dependent upon your age, current interest rates and the appraised value of your home. This online calculator will give you an idea of what you might be able to borrow.

When you or the beneficiaries of your estate sell your home, the monies you received from the RM, plus interest and other fees, must be repaid to the lending institution.  Any remaining equity belongs to you or your heirs.

More information is available on the HUD site.  You can also get a referral for FHA approved lenders at Search online or call 1-800-569-4287.

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