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Friday, 21 November 2008 00:24
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 Real Estate Role Reversal:
With a Reverse Mortgage,
the Lender Pays the Homeowner
Reverse mortgages - which are a specialized type of home equity loan available to Americans age 62 or older - offer the homeowner a chance to get paid by the mortgage company, instead of the other way around. A reverse mortgage is a great tool for those who have paid off a home or have a large amount of accumulated equity, because it affords an opportunity to tap into that cash value without having to sell the home or move elsewhere. And thanks to recent changes in the rules and regulations regarding reverse mortgages, they are safer and more affordable than ever before, making them extremely popular with the huge demographic of retiring "Baby Boomers." Meanwhile younger Americans - or those on the cusp of the boomer generation - may have parents or grandparents who are senior citizens. As they help those relatives figure out how to plan for their financial futures many will turn to the reverse mortgage as a convenient solution.
· A reverse mortgage allows homeowners 62 and older borrow against their equity without making any payments to the lender. As long there is sufficient equity in the home, a reverse mortgage is feasible. There are no special income or medical requirements.
· The amount of funds received depends on the owner's age, the appraised value, and current interest rates. Usually those who are older and have more valuable homes are eligible for more money.
· Payments made to the homeowner while the reverse mortgage is in place can be made in a lump sum, through scheduled monthly payments, via a line of credit, or through a mixture of different payment options.
· Reverse mortgages are loans, but do not have to be repaid until the homeowner dies or moves out of the house. When the loan is repaid the amount owed can never exceed the actual value of the home. If the home has lost value the lender must accept the loss.
· If the home is sold and the proceeds exceed the amount owed on the reverse mortgage, the excess goes to the owner or the owner's heirs. But as long as the senior occupies the home they do not have to repay the reverse mortgage.
· Those facing foreclosure due to a shortage of income may consider using a reverse mortgage to get the cash they need. Those who have an existing reverse mortgage can also refinance it in order to take advantage of more favorable terms or interest rates.
· Reverse mortgages are available through credit unions, banks, and mortgage companies, and one kind of reverse mortgage - the Home Equity Conversion Mortgage (HECM) - is offered with insurance backing from the Federal Housing Administration (FHA).
· New legislation has made the terms and conditions of reverse mortgages much more transparent, and FHA-insured reverse mortgages require that seniors first take financial counseling from a HUD-certified professional. These steps help to prevent mortgage fraud perpetrated against seniors.
· Most - if not all - of the costs related to originating a reverse mortgage or HECM can be rolled into the mortgage in one way or another, so that the homeowner incurs no out of pocket expenses. This is particularly important because so many of those who look to reverse mortgages live on a fixed income and cannot handle unexpected outlays of cash.
 One of the most exciting and important new developments regarding reverse mortgages is that higher limits on these mortgages have been authorized. The new nationwide ceiling on the amount that a senior can borrow is now $417,000 in the continental USA and $625,500 in Alaska and Hawaii - where home prices tend to be higher. Because of these new higher limits, mortgage companies expect to see a spike in the number of reverse mortgages that are refinanced. Seniors with more valuable properties will now be able to refinance, for example, to tap into higher amounts of equity that used to be severely limited by the lower cap.
The so-called Baby Boomer generation accounts for almost 30 percent of the American population, and the first "boomers" turned 60 years old in 2006, representing the largest-ever segment of American society to hit retirement age. 80 percent of Baby Boomers own their own home, and more than 60 percent of them are mortgage-free because they have already paid off their home in full. But while the Baby Boomer generation as a group is extremely wealthy, boomers are retiring and therefore need to gradually liquidate much of their equity holdings over the next decade.
The reverse mortgage allows them to do that with a primary residence, and for most Americans their home represents their most valuable asset - so the number of reverse mortgages in the USA is soaring as our population ages. To determine if a reverse mortgage is appropriate, consult a financial planner, real estate attorney, or mortgage broker.
For expert help with all your mortgage needs from lenders devoted to the GLBT community, visit www.GayMortgageLoans.com and www.GayRealEstate.com, or call toll free 1-888-420-MOVE (6683).
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