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July 4, 2009
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Reverse Mortgage Article
WHY THE REVERSE MORTGAGE MARKET IS GETTING SO MUCH ATTENTION
Posted: November 28, 2008 10:28 AM ET
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What is a Reverse Mortgage, and is it right for you? This is the place baby boomers come to find the answers.  Joel Gurman Vice President One Reverse Mortgage |
(50PlusPrime) SAN DIEGO, CALIFORNIA --
Right now, reverse mortgages are gaining popularity among senior homeowners. But why? What’s making the reverse mortgage market thrive?
First and foremost: a challenging market. With the cost of living on the rise and the volatile stock market, maintaining a comfortable retirement is growing more difficult. Another factor to consider is that the Federal Housing Administration announced new reverse mortgage loan limits of $417,000. That could help about 30% more senior homeowners qualify for reverse mortgages, or those who already met the qualifications could now get a bigger pay out. Former loan limits were set by county. Several counties had lending limits around $200,000 which has reduced the amount of equity that seniors living in homes with high values could access. These new limits will have a positive impact on homeowners 62 and up who need help – especially in today’s market.What is a reverse mortgage?
Reverse mortgages were designed by the federal government specifically for seniors (homeowners 62 and older) as a form of financial relief. They are designed to help eliminate your mortgage payment and even receive additional tax-free income (if you have enough equity) that you can use however you’d like. Think that sounds good? It gets better. Unlike traditional 'forward' home loans or home equity loans, there’s no monthly payment associated with reverse mortgages. You don’t have to pay back the loan until the homeowner no longer lives in the property as their primary residence.
The application process is the same as any other loan. Your current mortgage (if you have one) will be paid off with your new reverse mortgage totally eliminating any current mortgage payment you have. From there, homeowners can choose the way they’d like to receive the income from their reverse mortgage – as a monthly payment, in a lump sum or any combination of those options.
What are the requirements for a reverse mortgage?
Age and equity. All homeowners on the title of the home must be 62 or older, and you have to have a substantial amount of equity in your home to qualify. The amount of money you qualify for is specific to each applicant’s age and the specific amount of equity in your home, as well as the new loan limit of $417K. There are no income or credit requirements. Talking with a reverse mortgage expert is the best way to get a more specific amount.
Common Myths About Reverse Mortgages
Reverse mortgages carry some mythical baggage typically because people don’t know as much about them. Common myths include: You’ll owe more than your home is worth, you need to own your home free and clear to qualify, when you get a reverse mortgage the bank owns your home and there are limits on how you can spend the money you receive from a reverse mortgage. With a little research, these myths can be dispelled by the nature of a government-insured reverse mortgage program. The government created reverse mortgages specifically to help this age group live better lives, pay medical expenses and cover the rising cost of living… not put them in a more vulnerable position. In fact, every reverse mortgage applicant is required to participate in a counseling session by a third objective party to insure that you are a good candidate for the program.
Sometimes there’s a question about inheritance and how to still have something left to pass on to heirs. If inheritance in the form of equity is an issue, talk to a Reverse Mortgage Expert about your options. If you have enough equity, you can opt against receiving the full payout, reserving a portion of the equity in your home to pass on. Or, if you have enough equity in your home to eliminate your mortgage payment and receive additional cash, you can choose to reserve that amount in an interest-bearing account to pass on, like for college tuition. You’ll definitely want to check with your financial advisor on your options.
Make sure to read up on common reverse mortgage myths, and ask a reverse mortgage expert to answer your questions in detail. Make your decision only after you feel absolutely comfortable with your understanding of the program. See Reverse Mortgage FAQs.
Before moving ahead with a reverse mortgage, I recommend that you consult your financial advisor, tax advisor and/or a reverse mortgage expert to review your specific situation.
For a free, no obligation quote, contact One Reverse Mortgage toll free at 800-251-9080.
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