WHAT IS A REVERSE MORTGAGE????

A reverse mortgage enables the borrower to withdraw a portion of their home's equity, use it any way that they want, make no form of monthly repayment, stay in their home as long as they like and when they are ready to sell the home or have passed away, the loan is repaid.  This program is insured by the Federal Government. The borrower does not forfeit title to the home or lose any other rights as the homeowner. The borrower or the borrower's heirs decide when or if the home is to be sold and after repaying the loan balance, all remaining equity in the home belongs to the borrower or the borrower's heirs.

QUALIFYING FOR A REVERSE MORTGAGE!!!!

Qualifying for a reverse mortgage simply requires that the homeowner(s) be 62 years of age or older, own or be purchasing a home that is considered their primary residence, and the home must meet standard appraisal guidelines for property type, value and condition. Since the borrower does not make a monthly payment, factors such as credit rating, income and assets are not considered.

Recently we had a widow who was left penniless and with a big mortgage on her home when her husband died. Her Social Security check was just enough to cover the monthly debt. For the last year she had taken babysitting jobs and odd jobs to make ends meet. She had also been living on food stamps and the charity of others to help her out. When she spoke with one of our Account Executives, she was behind on her taxes and had not been able to renew her insurance. Her credit was ruined by the medical bills from her husband's sudden death. The reverse mortgage paid off her home mortgage and provided her with a small amount of extra cash. Her Taxes and Insurance were caught up and her social security payment now goes to provide food and pay her bills. Her Reverse Mortgage made it possible for her to now afford to live in her home.

ARE REVERSE MORTGAGES SAFE FOR THE HOMEOWNER?

In 1988 HUD adopted reverse mortgages and with the assistance of Congress, enacted laws that put into place 12 safeguards that guarantee a senior will not give up title to their home and will not put themselves, their home or their family in any financial risk. Paying off a traditional mortgage with a reverse mortgage secures the home and eliminates any possible risk of foreclosure due to an inability to make a monthly mortgage payment.

FOR EXAMPLE!!!!!!

"When I received notice that due to an escrow shortage and an increase in my property taxes my house payment was increasing $200 per month, I felt I had no option but to sell my home.  When I discovered that using a reverse mortgage I could keep my home, have no mortgage payments, and receive monthly income, I couldn't believe it. My only regret is that it took until I was 78 to start enjoying my retirement." WT - Littleton, CO

HOW MUCH EQUITY IS USED AND HOW DOES A BORROWER TAKE THEIR MONEY?

HUD provides authorized lenders with a Reverse Mortgage Calculator that determines the Amount of equity available to a homeowner. The determining factors are the borrower's age, the home's value and the current interest rate. From this calculation, fees are deducted and any existing mortgage balances are paid in full. The amount that remains is available to the homeowner to draw as a lump sum, treat as a line of credit, receive as lifetime monthly tax-free income, or any combination of these three options. Regardless of how the borrower chooses to draw their funds, they will make no monthly payment. Interest accrues only against the funds they draw, and all remaining equity belongs to the borrower or their heirs.

 

Larry Bettag - Regional Vice President, Midwest Region

Illinois FHA Specialist

630-417-7172

  

               

An Illinois Residential Mortgage Licensee

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