What is a Reverse Mortgage Loan?
Reverse mortgages have increased in popularity in the past
few years.  Economist report that due to the increase in
housing cost, the amount of money people are saving in
their 401(k) and savings accounts have been decreasing.
 
Due to the recent boom in the real estate market more and
more seniors are looking to cash in on their home equity.
People are finding themselves equity rich and cash poor. It
is not unusual to find people living in million dollar
homes yet they are below or near poverty level in monthly
income.
 
Forturnately reverse mortgages are available for this
specific reason. Before you proceed with a reverse mortgage
do your research and make sure it is exactly what you want
to do.
 
The FHA and the Department of Housing and Urban Development
have taken over the responsibility of administrating
reverse mortgages.
 
One of their first changes, was to regulate and control the
interest rates which lenders can charge for the reverse
mortgages. All reverse mortgage lenders within the United
States will have the exact same interest rates.  When
choosing a lender do not concern yourself with comparing
interest rates.
 
Reverse mortgage interest rates are adjustable rates which
are tied to very conservative indexes, usually the 1 year
treasury bond rate or the LIBOR index. The rates very
moderately and usually will not have much effect on your
mortgage.
 
A reverse mortgage is still a home mortgage utilizing the
equity in your home as collateral. It is totally different
mortgage compared to the mortgage you had when you
initially purchased your home. Here are a few facts about
reverse mortgages.
 
The Bank Pays You Each Month: Yes, that's right, you will
receive a monthly payment with a reverse mortgage.  There
are basically three options to receiving your payments. You
can receive a one time lump sum, you can receive payments
at amounts and times you request, and most common meathod
is to receive a regular monthly payment.
 
You Still Live in Your Home: Most seniors do not want to
change dwellings at this point in their lives, hence the
main reason for a reverse mortgage.  You will stay in your
home while drawing monthly income against the equity.  In
fact it is a requirement that you retain this home as your
principal residence.  You can still have the lake home or
the vacation home, you just need to maintain this residence
as your primary home.
 
You Retain 100% Ownership Of Your Home: You will keep all
the rights of ownership which you had prior to the reverse
mortgage. This is still your home and you can do anything
to it or with it that you normally would. It can be
remodeled, sold, or will it to your children.
 
However, should you sell your home or die, you will have to
pay back the bank the amount of payments you have received,
plus interest, before the balance can be distributed to you
or your surviving spouse or the estate.
 
Your Principal Amount Increases With Each Payment Received:
This is still a mortgage and the amount you receive must be
paid back. This is usually done when your heirs sell your
home after you and your spouse no longer live there. After
you pass away the monthly payments will stop, however the
principal amount and the maturity date of the loan can not
be determined until the actual day the loan is paid back.
 
You Can Never Owe More Than The Value of Your Home: If you
choose a reverse mortgage backed by the Federal Programs,
you can never borrow more than the value of your home.  You
will never be forced to liquidate other assets to repay the
loan.
 
Summary
 
If you have equity in your home and you are beyond the age
of 62, you can receive a reverse mortgage which will
provide you the additional monthly income needed to
supplement your retirement income.  You will still own your
home and continue to live there as you do now and your
obligations to the lender will be satisfied by the equity
in your home.
 
Copyright (c) 2007 Brian Ankner
 
 
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