Reverse Mortgage

Reverse mortgage loan is available for older homeowners who can borrow money against the value of their home. There is no need to make repayment of reverse mortgage until the borrower dies or the home is sold. While the home is sold the required accounting is done for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciated, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.  

Most reverse mortgages are provided by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. With reverse mortgages, you receive money from the mortgage company as an equity secured as a loan against your home. The amount is paid in lump sum sometime as monthly payment or through the line of credit. A certain amount of fees and interest is charged on the loan amount. Therefore, in the course of time the loan balance increases and your home equity decreases.

A reverse mortgage offers you a source of income while allowing you to stay in the home. Also, it renders to be the effective way to benefit from the money you have invested in your home over the years. Though there are some obligations before you acquire the reverse mortgage. These are -

  • You need to pay your property related expense on time . These expense include property taxes, utilities, homeowner’s or condo association dues, homeowner’s insurance and flood insurance premiums (if any).
  • You should take care and maintain the condition of your home. It should be in same condition as it is at the time of taking reverse mortgage loan.
  • You need to reside in the same property and name it under your primary residence. Proper certification for the same is required to be done on annual basis.
  • Reverse mortgage is definitely one of the best mortgage options available for the users though it is valid fo senior citizens only. The senior citizen borrowers with good credit should carefully analyze the mortgage option to avoid any misunderstanding at later stages.