Reverse Mortgages

Reverse mortgages are loans available to senior citizens who have equity in their homes. These loans convert the equity in your home into cash in order to make your retirement years financially easier.

Most lenders are consumer oriented; however, there are a few lenders who prey on seniors. Flyers on your car windshield advertising reverse mortgages, for example, will be from lenders trying to take advantage of seniors who don’t have a complete understanding of this product.

The Home Equity Conversion Mortgage (HECM) is what the Federal Housing Administration (FHA) calls its reverse mortgage. Seniors can be assured that the FHA will make it safe to withdraw the equity from your house. FHA-lenders require the customer to be at least 62 years old, that they be living in the primary residence and have a low mortgage or zero mortgage. It’s a waste of money to use an estate planning service to find an FHA-lender.

The reverse mortgage is different from a traditional home equity loan or a second mortgage because payment isn’t due until the borrower is out of the house. As long as the borrower is in the house, you don’t have to pay back the loan. When the heirs sell the house, they must pay back the lender the amount borrowed plus the interest accrued.

A reverse mortgage is expensive. The younger you are when you get the loan the more interest is accrued monthly. If you aren’t facing a financial emergency, get a reverse mortgage in later years when you may need it the most. A home equity loan or an equity line-of-credit is less costly than a reverse mortgage. However, you have to be able to make monthly repayments.