REVERSE MORTGAGES

A new option for people over the age of 62, who own and live in their home, is the reverse mortgage. A reverse mortgage will allow you to get money out of the home without having to make monthly payments. This mortgage is a loan against the home and does not have to be repaid while the owner is still living, providing that they still have an income ie a lump sum, a line of credit, or monthly payments. With a reverse mortgage your debt slowly increases and your home equity decreases over time – the rising debt falling equity scenario. Reverse mortgages cannot be used for mobile homes or cooperatives, rather single family homes and even some condominiums. There are also private loans available through banks or mortgage companies which can be used for anything – these loans often have other costs, more interest, or transaction fees. With a reverse mortgage you are still the owner of the home, you still have to pay property tax, insurance, and repairs. The largest cash advances come from the federally insured Home Equity Conversion Mortgage or HECM. These HECM loans give out larger payments than most other reverse mortgages. With a reverse mortgage you cannot rent out parts of your home, add a new owner, or take out a new debt against your home equity. If you declare bankruptcy, leave your home, or commit fraud it is possible to default on a reverse mortgage. If the government needs your property, or condemns it, the loan can be terminated. A reverse mortgage must be repaid when the owner dies. The heirs must repay the loan plus interest by selling the home. The heirs keep the difference in money if the debt is less than the price of the house. The lender cannot get payment from the estate heirs as it’s not possible to owe more than the home is actually worth. If the money received through the advance stays in an account longer than a month it is classified as liquid asset for Medicaid and SSI.