Reverse Mortgages

If you are over 62 and are a homeowner with a lot of equity in your house, you may consider refinancing into a Reverse Mortgage.  I had lunch with my friend, John Heene, of Directors Mortgage the other day and he explained this often misunderstood form of financing to me.  These mortgages continue to grow in popularity because it enables a homeowner to withdraw the equity in his house and use the cash proceeds for any purpose..travel, pay off debts, help their kids, make a luxury purchase or just live more comfortably.  John recommends that the borrower speaks to a financial advisor, as you would with any major decision like this.

The borrower retains title to the home throughout the life of the reverse mortgage.  He cannot be forced out of his home as long as he is paying the taxes and insurance.  It is only when the last borrower moves out of the house that the loan must be repaid.  At this point many times the borrower or his/her heirs choose to sell the home to repay the loan and preserve the remaining equity for the benefit of the borrower or his/her estate.  The borrower is in control of the home and retains title, not the bank or the lender.

To me a huge benefit is that a reverse mortgage allows a senior to stay in the home they love.  Many people do choose to move to a smaller home when they retire, but for others this may seem like a daunting task.  Seniors need to analyse their situation and the cost involved in moving (real estate commission of 6%, moving costs, etc.) and decide what would work best for them.

Two of the great safeguards for reverse mortgages are that they are structured so the borrower or his estate can never owe more than the value of the home upon repayment.  In addition, the HECM products are insured by the Federal Housing Administration (FHA), an arm of the U.S. Department of Housing and Urban Development (HUD).

Just a few more years and I will qualify for this!