Reverse Mortgages
by Llo Color yd Daniels
Senior Loan Center, Inc.
The senior population has a tough dilemma. Those retired for more than five or six years see their "buying power" eroded significantly. Those about to retire believe their future "buying power" will erode.
An exciting and creative way to increase the cash flow for retirees is the FHA Reverse Mortgage, also known as the Home Equity Conversion Mortgage or "HECM".
This FHA loan product was created as a way for Seniors to solve that age-old problem -- "house rich and cash poor". This program allows seniors over the age of 62 to convert the equity in their home to cash utilizing flexible programs that meet their personal financial needs. Their homes must be free and clear or have a low loan balance.
The program is designed to produce regular monthly income for life, or for a specific number of years, a line of credit or a combination of these plans. The income received from the loan is tax free. The program allows you and/or your spouse to enjoy home ownership, and no repayment of the loan is required as long you and/or your spouse are living in the home.
The criteria for an FHA Reverse Mortgage are easy to meet and do not impose any income restrictions or net worth requirements. Those requirements are:
- All borrowers must be over the age of 62.
- Your home must be "single family residence". Duplexes through four units are not eligible at this time. Condominiums and planned Unit Developments may be eligible if they are in an FHA approved project.
- Unlike conventional forward mortgages, the FHA Reverse Mortgage does not require you to "qualify" in the traditional manner. Credit history is not important to qualify for a Reverse Mortgage. Existing home mortgages, deferred taxes or any federal debt must be paid in full, but these can be paid out of the loan proceeds.
The FHA insurance guarantees that you will receive all the payments that are due you if you live in your home. You and your heirs are protected from the loan balance exceeding the value of the house. FHA insurance, in effect, picks up the difference. As long as one spouse continues to occupy the home, the surviving spouse will enjoy all the rights and privileges of home ownership.
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