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REVERSE MORTGAGE - I

Reverse Mortgage, a loan available to seniors is used to release the home equity in the property as one lump sum or multiple payments. Lender in this type of Mortgage is under the obligation to pay the homeowner until he dies or home is sold as agreed. In a reverse mortgage, the homeowner makes no payments and all interest is added to the lien on the property. And, in return, the owner receives monthly payments, or a bulk payment of the available equity percentage depending upon their age. However, if the property value has increased after a reverse mortgage is taken; it is possible to acquire a second (or third) reverse mortgage on the increased equity in the home.


To qualify for a reverse mortgage in the United States, the borrower must be at least 62 years of age. Though, there are no minimum income or credit requirements, there are other requirements which homeowners should make sure before investing significant time or money into the process.

The amount of money that would be available to the borrower through reverse mortgage is determined by the following factors:

  • The appraised value of the property, whether any health or safety repairs need to be made to the house, and whether there are any existing liens on the house.
  • The interest rate, as determined by the U.S. Treasury 1 year T-Bill, the LIBOR index or 1 Year CMT.
  • The age of the senior (The older the senior is, the more money he/she will receive).
  • Whether the payment is taken as line of credit, lump sum, or monthly payments. While line of credit will maximize the money available, lump sum provides the cash immediately with the interest fees at the highest. Monthly payments are set up as a "Tenure" payment and borrowers receive the same for the rest of their lives no matter how long they live.
  • The value of the property, and whether that value is higher than the national loan limit set by HUD.

Several reverse mortgage calculator available in websites of various lenders could determine the amount obtained through reverse mortgage. It is a system designed by the Federal Housing Administration that determines a Senior Homeowner’s eligibility for a Reverse Mortgage Transaction. The processes available are based on the youngest borrower and property value, etc. The money received through reverse mortgage is tax-free, and would have no effect on social security or medicare benefits and may be taken as cash lump sum, a line of credit, monthly payments for LIFE or even a combination of all.

Noteworthy point is that Reverse Mortgages is a safe and viable way to help you sustain your retirement.

 

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