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Frequently Asked Questions About Reverse Mortgages

Aug 28, 2008
Reverse mortgages are an exciting and fast growing way for seniors 62 and older to keep their property and tap their equity to improve cash flow. Many people have questions about reverse mortgages and here are some common questions and answers.

What is a reverse mortgage?

A reverse mortgage is a loan for seniors 62 and older to tap their equity in their home. They do not make any payments on the loan until the house is sold.

Who qualifies for a reverse mortgage?

To qualify for a reverse mortgage, you need to be at least 62 years old and own the property free and clear or have a very small mortgage balance. Unlike traditional mortgages, credit and income is not considered for reverse mortgage eligibility.

How do I get my money?

This is up to you. It's your equity. The only requirement is that any outstanding lien (mortgage or other debt against the home) on the property must be paid in full at the time the reverse mortgage is done. You can take the remainder of your reverse mortgage funds as a lump sum, line of credit or monthly payments. And the best part of all is, you can take any combination of these choices- some money as a lump sum to perhaps pay off bills, some as a line of credit to meet future needs, and some as a monthly amount to supplement your current income. You can even change your mind down the road- it's your equity, it's your choice.

What are some things that I can do with a reverse mortgage?

You can do anything you want with the proceeds as long as you pay off any liens against your home. Once that is done, the funds from a reverse mortgage can be used for virtually any purpose- supplement your current income, pay off bills, home improvement, travel, the list is virtually endless.

Why don't I just sell my home?

Sometimes, that may be the best solution. A good loan officer will answer all your questions about a reverse mortgage and then let you decide. However, if you sell your home, where will you live? You also need to consider the costs associated with the sale.

When does the reverse mortgage become due?

Once the home is no longer your residence, the loan becomes due. Depending on the situation, you may decide to have children or other heirs sell the home, or if they want to keep the property, they will need to pay off the reverse mortgage either with their own funds, or by obtaining a regular or "forward" mortgage. In any case, a reverse mortgage is an FHA insured "Non Recourse" loan which means that you will never owe more than the property is worth. Of course, any remaining proceeds after the sale of the home will go to you or your heirs. This is a very safe and highly regulated financial product.

How can I find out how much money I qualify for?

This depends on your age, the property value and the amount currently owed. The best way to find this out is to contact your loan officer or use the calculator on the AARP website.

As you can see, reverse mortgages are here to stay. For more information about reverse mortgages and to see if they are right for you, contact your loan officer.
About the Author
Carlos Scarpero is a Dayton, Ohio based reverse mortgage originator and expert. Learn more about reverse mortgages by visiting www.CarlosScarpero.com
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