Saturday, March 25, 2006

What is a Reverse Mortgage?

BY FRANK MILLER

The first thing you need to do in order to understand the Reverse Mortgage, is to “throw away” everything you “thought you knew” about mortgages! While a Reverse Mortgage is a lien against your home like any other mortgage, that’s pretty much where the similarities end.

· A Reverse Mortgage is a special, Government sponsored program designed specifically for homeowners over the age of 62. Unlike a traditional mortgage, there are no monthly payments to make. There are also no credit or income checks required to qualify for the mortgage. This can be an important factor for seniors with less than sterling credit or for those living on reduced retirement incomes.

· Rates for Reverse Mortgages are set by our favorite Uncle (Sam). Because of this, “shopping for rates” between different brokers becomes a non-issue. Regardless of who you use to obtain your mortgage, your rates will be the same. This allows you to use the broker or bank that you feel most comfortable with – not the one who simply offers you the “best rate.”

· Under a traditional mortgage the monthly payments pay for the interest and most often, pay off principal on the loan, thereby reducing the amount of the mortgage. With the Reverse Mortgage the amount of cash you receive, together with the interest and other charges, are added to the loan balance. This balance however, never has to be re-paid until you move out of your home. (You do have to keep your taxes and insurance current and you are required to maintain the home.)

· A Reverse Mortgage is a non-recourse loan. This means that no assets other than your home can be attached to pay off the mortgage. This, combined with the fact that the mortgage amount can never exceed the value of your home (regardless of what it could conceivably grow to), provides perhaps the most attractive benefit of these mortgages.

Should the value of the mortgage be less than that of your home, either you or your estate receive the difference when you leave or pass away. Taken together, these features offer what could be considered a “Win-Win” situation.

Your mortgage balance becomes due when you sell the home, when you vacate it for more than 12 months, or when the last surviving senior homeowner passes away. On sale, it is satisfied at closing, as would be any other mortgage. Your heirs will have the option of paying off the amount due and keeping the home, or of simply selling the home.

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Frank Miller: Reverse Mortgage Specialist With almost 20 years in Securities and Financial Planning, Frank is passionate about Reverse Mortgages for seniors. He views the Reverse Mortgage as a serious Financial Planning tool that can aid in many aspects of financial planning, making positive changes in the senior lifestyle.

Seniors or organizations interested in learning more about the reverse mortgage option, can benefit greatly from Frank’s broad financial background and experience. He can be contacted at 631-312-3569 or in the office at 866-937-3837.

3 comments:

Anonymous said...

My wife and I are in our seventies and considering a reverse mortgage. We own a free-and-clear condo worth about $500,000. However, it is in a small complex of three units. We have been told our unit won't qualify for a reverse mortgage? please explain how this works.

I await your post..

Frank Miller said...

Hello anonymous.

Sorry for delay but I've been away for a few days.

I'm not sure what your specific situation is - or who advised you that you wouldn't qualify but most condo's will qualify for a Reverse Mortgage, not all.

It depends on any restrictions the condo association may have.

Best way to check this out is to review your specific condo situation. You can give me a call if you like at 631-312-3569, and I'll be happy to look into it further for you.

Thank you,
Frank Miller

Ted said...

It's hard to say that most condos would be approved. I'm sure it depends on if the condo is HUD approved.