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Demystifying the Reverse Mortgage
Copyright 2004, Craig Romero
The term is being heard by homeowners near and far, but what
exactly is a “reverse mortgage?” It’s a relatively new option,
and one that is surrounded by many myths and misunderstandings.
When you get down to it, a reverse mortgage is a rather simple
and straightforward option for many homeowners who can take
advantage of the benefits that this mortgage method affords
them. A reverse mortgage is a loan on a home that does not
have to be paid back for as long as the homeowner lives in
that home.
To qualify for a reverse mortgage, homeowners must meet certain
criteria, and normally must be 62 years of age or older. This
type of mortgage offers homeowners the benefit of taking out a
home equity type of loan, without the obligation of having to
make monthly payments to repay the money borrowed. With today’s
economy, and so many senior citizens living at or below poverty
level, this relatively new mortgage program may offer the
perfect opportunity for qualifying seniors to get back on
their feet.
There are three main types of reverse mortgage programs offered
today. They fall into three categories:
1. FHA Insured
2. Lender Insured
3. Uninsured
The exact details of each of these reverse mortgage types
differ, and for homeowners thinking about pursuing a reverse
mortgage program, a reverse mortgage counselor should be
consulted to find out which type of reverse mortgage best
suits your needs.
With a standard or “forward” mortgage or home equity loan, a
home owner is responsible for making monthly payments to repay
the debt of the loan. Reverse mortgages only require the
homeowner or the homeowner’s heirs to pay the loan back when
the homeowner is no longer living in the home. If the homeowner
decides to sell the home and move out, the loan will be paid
back by the proceeds of the home sale. If the homeowner has
passed on, and the heirs are responsible for paying the reverse
mortgage back, the mortgage can be satisfied by rolling the
reverse mortgage into a “forward” mortgage or selling the home
and using the proceeds to satisfy the loan requirement.
When a homeowner does opt for the reverse mortgage option,
there are three main ways that they receive the funds from the
loan. Homeowners can receive a one-time lump sum in cash, a
regular monthly cash disbursement, or an open credit line that
allows the homeowner to determine how and when they need the
funds paid to them.
If you, or someone you know, is a homeowner 62 years of age
or older and is in need of cash to cover their daily living
expenses or would like their home to provide a source of
regular income, this is an option that is growing ever popular
and should be looked into and considered.
Craig Romero is an author and mortgage analyst dedicated to
helping homeowners maximize the investment in their homes.
Discover how to quickly build a minimum of $40,000 worth of
home equity and pay your mortgage off in 10 years or less
without making biweekly mortgage payments.
Visit: http://www.wisemortgageinfo.com
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