Mountain View Medical Supply

Friday, September 30, 2011

Reverse Mortgages for Seniors

Reverse mortgages are becoming more popular in America, for senior homeowners.

HUD, via FHA, offers The Home Equity Conversion Mortgage (HECM) which enables a homeowner to withdraw some equity from their home. The funds can we withdrawn with a fixed monthly amount or a line of credit, or both. So, if you need a monthly source of income, or a larger one-time amount to do home improvement, you have several options to choose from.

To borrow with HECM, you must be 62 years of age or older, own your property outright or have a small mortgage balance, occupy the property as your principal residence, not be delinquent on any federal debt, and participate in a consumer information session given by an approved HECM counselor.

The amount you can borrow depends on 1) the age of the youngest borrower, 2) current interest rate, 3) lesser of the appraised value of your home or the HECM FHA mortgage limit for your area or the sales price and the initial Mortgage Insurance Premium (MIP) option you choose. Basically, the more valuable your home is, the older you are and the lower the interest rate, the more you can borrow.

Unlike ordinary home equity loans, FHA reverse mortgage HECM does not require repayment as long as the home is your principal residence and the obligations of the mortgage are met. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to you or your heirs.

If the sales proceeds are insufficient to pay the amount owed, FHA will pay the lender the amount of the shortfall. FHA collects an insurance premium form all borrowers to provide this coverage.

Of course as with all loans, there is a cost associated with the loan, and those can be rolled into the mortgage.

Many companies offer reverse mortgages, which means there are also scammers trying to steal hard earned money. HUD offers a Lender List that can help you to find a viable reverse mortgage lender. Also, if you or a anyone you know is a victim of homeownership fraud, contact HUD.

HUD Homeownership Center & FHA Resource Center can be reached at or call 800-225-5342.


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