Reverse Mortgage Options

Reverse mortgages offer a lot of alternatives versus a few years back. Since they are relatively new many people do not understand the basics. I would like to explain a few basic principals behind the reverse mortgage that might aid in decision making.

Reverse mortgages do not have a repayment schedule like traditional mortgages and are typically not repaid until the borrower dies, moves, or refinances. As such, reverse mortgage terminations are primarily driven life expectancy and mobility, which is the timing of borrower deaths and voluntary loan payoffs associated with moving out of the mortgaged property. Reverse mortgages likely will be used in many of these cases. Reverse mortgages are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more.

FHA HECM loans are the most popular type of reverse mortgage and can help your parents live independent in their golden years, and balance their needs and wants with your own goals. FHA's HECM program helps you protect yourself from misinformation and predatory lenders because it is regulated by HUD plus they require you to receive counseling through a HUD-approved, non-profit counseling agency. FHA will allow people in high value areas to borrow more money than the Fannie Mae Homekeeper. Your appraisal and the county lending limit will be used to determine how much you can borrow as well.

FHA insurance will cover any balance due the lender. None of your other assets (including personal checking or savings accounts) will be affected by HUD's reverse mortgage loan, and this debt will never be passed along to your estate or heirs. If they want the property they can refinance the reverse mortgage into their own names. HUD's reverse mortgages are available in all fifty states, as well as the District of Columbia and Puerto Rico. They do, however, have limits on the amount of money that can be borrowed. Every county has a lending limit based on FHA guidelines. You can use the

Lenders recover their principal, plus interest, when the home is sold or refinanced. The remaining value of the home goes to the homeowner or to his or her survivors. 1st Reverse has a fixed rate HECM reverse mortgage product that eliminates rate fluctuations, therefore eliminating interest rate risk. The fixed rate HECM has maturity conditions similar to those of a traditional HECM, including no loan repayments so long as the borrower maintains home owner's insurance, pays real estate property taxes, maintains the home and does not vacate the residence for more than 12 months.

HECM loans also tend to offer the biggest loan amounts. Consider: A 65-year-old in Milwaukee, WI, with a $150,000 home will get about $82,116 upfront with the HECM loan versus $23,406 with a competing loan known as the Homekeeper, according to a reverse-mortgage calculator. HECMs generally provide larger loan advances at a lower total cost compared with proprietary loans. Proprietary reverse mortgages don't usually have a maximum though and are great for jumbo mortgages.

The decision on whether to reverse mortgage or not to take out a reverse mortgage is a complicated one. I highly recommend doing what you are right now. RESEARCH before you make a decision. If you can't seem to find the answers maybe you should get counseling first since it is mandatory anyway.