Reverse Mortgage

To answer the question, what is a reverse mortgage? The United States government through its Department of Housing and Urban Development (HUD) was the first to offer the reverse mortgage. A reverse mortgage is a special mortgage in USA for senior citizens who are above 62 years of age and have a home or have a very low balance left on their mortgage. They qualify for a reverse mortgage. In a reverse mortgage there are only upfront costs that the person has to make like closing costs after which they do not make any payments towards the mortgage loan or interest on the loan. After the death of the person who has a reverse mortgage the property is sold and the lender adjusts the proceeds of the sale towards the reverse mortgage loan that the person had taken. If there is any money left after the lender has taken the monies owed on the reverse mortgage and if there are any heirs of the person who took the reverse mortgage they get that money. The heirs can also keep the property if they pay off the reverse mortgage. If a person who has taken a reverse mortgage and decides to sell the place and move out, he or she has to inform the lender. The person is given one year in which to sell the place and repay the reverse mortgage and move out failing which the lender can get a ‘foreclosure’ on the house and sell it.

Who qualifies for a reverse mortgage in USA? Senior citizens who are above 62 years of age and own a home or have a very small mortgage balance qualify for a reverse mortgage. The house against which the reverse mortgage is being taken has to be the primary residence of the person. The type of house against which a senior citizen can get a reverse mortgage has to qualify as per the Federal Housing Authority (FHA) rules. The interest rate that is applied on a reverse mortgage depends on the age of the person applying for the reverse mortgage. The older the citizen is lesser the interest rates that he or she will be charged. The amount of loan that one can get will depend on the value of the property and the FHA limits for that area whichever is lesser will be used. There are various options for receiving the payment of the loan, which can be paid in monthly installments, or any tenure that the person wants.

There are disadvantages of a reverse mortgage which are; that a person has to pay more closing costs and there may be an insurance policy that one is required to take. The closing cost charges are higher then of any other mortgage as the lender is paying out money without getting any immediate returns on it. Also if the money stays in an account with out being utilized within a month the citizen may loose some benefits that they were entitled to like free Medicare.

As the reverse mortgage is a US government program to help its senior citizens some states have also got their own reverse mortgage programs. Certain banks have been given permission to do reverse mortgaging and Wells Fargo reverse mortgage is one of them, California reverse mortgage lenders are also limited.

Like any mortgage there are reverse mortgage pitfalls like the high cost of getting a reverse mortgage which turns many senior citizens away and they prefer to take a HELOC which is a Home Equity Line of Credit which has lower interest rates. Reverse mortgage lenders who offer reverse mortgage can get reverse mortgage leads from a number of sources and may use these leads to contact senior citizens and get them interested in taking out a reverse mortgage.