Is a Reverse Mortgage the Right Choice for You?

By Karen Lawson
LoanPage.com Columnist

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Reverse mortgage loans were designed by lenders to assist senior homeowners in accessing home equity to improve their cash flow. These loans are subject to eligibility requirements, and a reverse mortgage may not be appropriate for all situations.

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A Mortgage Loan That Pays Me? How Can That Be?

Homeowners who've owned their homes for many years often accumulate significant amounts of home equity. Generally, home equity is the difference between what you owe on mortgage loans and what your home is worth. Many seniors pay off their mortgages, but find that they need more cash to live comfortably and maintain their homes. Reverse mortgages allow these homeowners to draw on their home equity without selling or taking on additional debt. The reverse mortgage does not have to be paid until the homeowners vacate or sell the home. Designed for the unique needs of senior homeowners, reverse mortgage loans are only available to homeowners 62 years of age and above. Here are more general qualifications required for getting a reverse mortgage:

» The home must be the borrowers' primary residence
» Homeowners must have a very low or no existing mortgage balance
» Homeowners wanting a reverse mortgage must attend reverse mortgage counseling workshops before applying for a reverse mortgage

The amount available for borrowing with a reverse mortgage depends on factors such as the number of homeowners, their ages, and how much their home is worth. You can change the payment structure of a reverse mortgage at any time during the life of the loan. Typically, a small fee may be charged for this service. You can prepay your reverse mortgage without penalty. Contact your mortgage lender to learn more about reverse mortgage programs. Also, contacting a financial advisor can help you determine if a reverse mortgage can work for you. While reverse mortgage programs abound, seek out a Fannie Mae or HUD approved program and a reputable lender to ensure a fair deal.

Source
Fannie Mae

About the Author
Karen Lawson is a freelance writer with more than 15 years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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