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The Reverse Mortgage Solution

 
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PostPosted: Tue Aug 19, 2008 1:09 pm    Post subject: The Reverse Mortgage Solution Reply with quote

Thanks to Mary Hunt -aka- Everyday Cheapskate
If you, your parents or other seniors in your life are sitting on a big load of home equity while struggling to get by each month on a fixed income, listen up. The solution may be a Home Equity Conversion Mortgage (HECM) often referred to as a "reverse mortgage." As long as you own a home, are at least 62-years-old and have sufficient equity, you can get a reverse mortgage. There are no special income or medical requirements.

A reverse mortgage, while a godsend for many situations, is not a perfect financial solution. It should be your last resort, not your first. Should it become your last resort, however, rejoice because it is a remarkable solution in the right situation.

A reverse mortgage enables older homeowners to convert part of the equity in their homes into tax-free income without having to sell the home, give up the title, or take on a new monthly mortgage payment. Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. The source of the money is the equity in your home.

To qualify, you must own your home free and clear of any mortgage or equity loans, or owe so little that you are able to pay off all indebtedness at the closing of your new reverse mortgage.

Instead of your loan balance becoming smaller with each monthly payment, in a reverse mortgage the balance grows larger over time. Interest and principal accrue as the funds are used. Typically, the homeowner retains ownership of the property. A reverse mortgage does not require repayment for as long as you remain in the home so there is no possibility of losing the property through foreclosure. For many older Americans, this provides peace of mind.

Another beautiful feature of a reverse mortgage is that the lender cannot require repayment from any asset other than the home. When the homeowner leaves the property, it is either sold or refinanced to repay the reverse mortgage.

I know this sounds just too good to be true, especially for those of you who are secretly struggling during the years which should be your most carefree and secure. A reverse mortgage is indeed a safe debt and highly desirable for my readers who would rather have access to their equity instead of leaving it all to their heirs.

There are drawbacks you should know about before considering a reverse mortgage. First of all, the fees are considerable, and for the most part they are rolled into the loan.

Another thing you need to know and fully understand is that, by taking a reverse mortgage, you run the risk of using up your equity, leaving little, if any value in the home as an inheritance to pass on to your heirs. Bottom line, a reverse mortgage allows you to live off of your kids' inheritance. Be plenty grateful that you have that option.

As with all matters of financial consequence, you need to learn all you can about reverse mortgages before serious consideration. To learn more, read "Money from Home, A Guide to Understanding Reverse Mortgages," a free download at www.fanniemae.com or call 1-800-732-6643 to receive a copy by mail. You can also find more information at www.reversemortgage.org
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