There is a great deal of confusion and misinformation among the general public regarding reverse mortgages. In general, a reverse mortgage is a loan product secured by real estate that allows a property owners to convert their home equity into useable funds or a line of credit.
The vast majority of reverse mortgages are issued as part of the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (“HECM”) program. Since its inception, the HECM program has grown rapidly in popularity and in annual volume of loans issued. HECM loans are issued in strict compliance with FHA loan program and are insured by FHA.
Despite the popularity of the loan program, many people continue to misunderstand the loan product. For both the borrowers and their families the decision to move forward with a reverse mortgage can be a difficult one. However, for those who meet the requirements for a HECM reverse mortgage, the benefits can be very substantial.
How does it work?
A reverse mortgage is a type of home loan that allows a borrower that is 62 years old or older to turn the equity in their home into cash to improve their retirement lifestyle. Reverse mortgage borrowers continue to live in their homes, retain full ownership and are not required to make monthly mortgage payments for the loan period. Instead of monthly repayments, the loan is paid back in one lump sum when the borrower leaves the home. The borrower is, however, responsible for continued property tax and insurance payment as well as basic home maintenance and ensuring compliance with any additional loan terms.
How is a reverse mortgage different than other home loans?
Due to income and credit requirements, many seniors may not qualify for most home loans including home equity lines, but they are more likely to qualify for a reverse mortgage. Traditional home loans require monthly payments, which may create financial stress. Repayment of a reverse mortgage is deferred to when the borrower leaves the home (when the borrower passes away, moves, or sells their home). Reverse mortgages are also non-recourse, FHA-insured loans, which offer additional safeguards for senior borrowers and their families.
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At The Geheren Firm, our attorneys have extensive training and experience with reverse mortgages and in explaining the loan product to borrowers and their families. The unique nature of the loan package requires the skills of an experienced attorney. We will take the time to make sure that all questions are answered and that all the parties are completely comfortable with the closing. For additional information please feel free to contact us by clicking the link below.
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