What is a Reverse Mortgage
A reverse mortgage enables older homeowners (62+) to gain tax-free income by converting part of the equity in their homes. Homeowners DO NOT have to sell the home, give up ownership (title), or take on a new or higher monthly mortgage payment. Instead the payment is “reversed”, the lender makes payments to the homeowner.
Proceeds from a reverse mortgage can help eligible homeowners in a few different ways. If a home is owned free and clear, the reverse mortgage can provide immediate cash or a monthly payment for life. If there is an existing lien that is less than the amount of reverse mortgage eligibility, the existing lien can be paid off. Paying off the existing lien stops mortgage payments immediately and any remaining funds can be taking in the form of cash or monthly payments for life. Finally a reverse mortgage can payoff another reverse mortgage. The combination of a home increasing in value, interest rates changing and the homeowner aging can create a situation where a new reverse mortgage can payoff the old one and give additional cash or higher monthly payments.
In 1989 reverse mortgages become a safe and valuable tool when the Federal Government, through the Department of Housing and Urban Development, created a type of reverse mortgage called the HECM. Previous reverse mortgage programs had sometimes been detrimental to the homeowners, but the Federal Government saw value in the reverse mortgage if it were designed correctly. With the introduction of the Federally Insured HECM loan, Seniors had a legitimate way to convert the equity in their home into cash with no payments. Unfortunately the previous programs gave the reverse mortgage a very bad name, that we still have to overcome today with many Americans. Our goal today is to educate potential buyers about the facts related to this safe, federally insured, reverse mortgage.
"What is a Reverse Mortgage?" answered by HUD
"What is a Reverse Mortgage?" answered by the FTC
"What is a Reverse Mortgage?" at Wikipedia.com
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