Reverse Mortgages Explained
Most of us know that to buy a home we talk to a knowledgeable lender, arrange for a loan, and then off we go to either purchase the home, refinance the home, or take out an equity line of credit. But who knows about the Reverse Mortgage?
A Loan Program for Seniors
Reverse mortgages are government backed loans made only to seniors (62 years of age or older), who own a home and have equity in that home. There are lots of formulas that determine what kind of benefit the senior can get. (Remember this is a government program)
If the senior has sufficient equity, the reverse mortgage will pay off any existing loan on the property, allocate some of the equity back to the senior for whatever purpose they want, and STOP ALL FUTURE MORTGAGE PAYMENTS!
You heard me right. Never make another mortgage payment. Think what a relief that could be to a senior who has a limited income. Remember that taping into a home’s equity in today’s market is almost impossible, so a senior who has $200,000 in equity finds that those monies are literally tied up, unreachable, and of pretty much no use to the senior to use for any purpose whatsoever. If, however, the senior takes out a reverse mortgage, they will have no further mortgage payments (and all that money in their pocket), and usually a significant amount of cash that can be invested, spent or tapped as income on a monthly basis.
Sell Your Home Now – Buy Another – Make NO MORE MORTGAGE PAYMENTS!
But that’s not all. If a senior wants to sell their current home, and buy another home using some of the proceeds they get from that sale as a downpayment on another home, the Reverse Mortgage program named HECM is almost unbelievable!
Under HECM a senior can sell their existing home, pay off the current loan on that property, and then take the government benefit (Reverse Mortgage) allowing them to buy another property and NEVER, EVER MAKE ANOTHER MORTGAGE PAYMENT ON THE NEW HOME THEY PURCHASE. Remember that even with great credit and a substantial downpayment, seniors may find it impossible to qualify for a loan to buy even a modest sized home.