Featured Loan: Reverse Mortgage

A reverse mortgage is a note or lien that is placed on a property to payoff an existing mortgage and\or to pay a monthly amount to the lien holders for the remainder of their lives. This eleviates the burdon of a monthly mortgage payment and sometimes gives the individuals a monthly payment as well. Reverse mortgages have 2 basic qualifications…….all parties on the loan must be 62 or older and your equity position usually can not exceed 60%. There are different forms of a reverse mortgage. Most are FHA backed loans that are capped by the FHA loan limits of the county you live in. These come with the most favorable rates available. They have both fixed and adjustable rates available depending on your situation. If you wish to pull out the most cash possible in one lump sum, there is a version that is a conventional loan that allows the largest amount of cash at any given time. This version will come with a higher rate as you are borrowing the most money with this loan. Not all individuals over 62 with a mortgage will qualify, again, it will depend on the value of the property, how much is owed on that property, and how old the individuals are that will be on the loan.

You have the option to sell the property or to refinance out of this loan at any time. As with all loans, interest is charged on the amount borrowed. Whether taken in a lump sum, taken as a monthly check, or both, the interest is calculated on a monthly basis and is added back into the amount you have taken out. When you go to refi or sell the property the payoff will reflect these charges. In essence, this is one big equity line that rolls in the interest charged during the life of the loan and only requires repayment upon the selling or refinancing the property, or upon the death of all parties to the loan.

Obviously the older the individual is the more lenient the qualifications become as the mortality rate increases as your age does. Once you make application and have been given the proper information and consultation with a seasoned professional, you will be required to attend a counseling session given by a local counselor on reverse mortgages. These sessions are free of charge and given by a non-profit organization. This allows another opportunity for you and your loved ones to ask all the necessary and proper questions and to make sure this is the right decision for yourself. During the loan and the remainder of your life, you can not be asked to leave the property, as you still are the owner and deed holder. This is the case whether you outlast the performance of the loan or not. As far as your heirs go, they are still entitled to the property upon your passing. The estate will be settled as normal, the property passed on to your heirs and they will refinance out of the reverse mortgage. If they decide not to reside in property, they can sell the unit, payoff the reverse mortgage, and keep the rest of the monies of the estate as normal. They have one year, from the passing of the note holders, to settle the mortgage.

As always you need to consult a mortgage professional before making any decisions. Always ask if your loan analyst has completed the Reverse Mortgage courses needed to offer this loan. The lender and or broker that you work with must also be FHA approved to offer government backed loans.