Reverse Mortgage Basics

If you are 62 or older and have little to no funds due on your home loan, you can qualify for a reverse mortgage. An equity loan of this type is a special arrangement made between seniors and a lender (either a bank, online financing company, credit union or HUD). The lending institution will issue a reverse mortgage loan to applicants against the equity in their homes.

These types of equity loans are becoming more popular. The National Reverse Mortgage Loan Association reported a 68% increase in these loans in just one year. More than 13,000 homeowners each year use these loans.

Unlike other home equity loans, this type of loan is not paid back until the house is sold (either because of death or departure). Any amount left over from the sale of the house goes to the homeowner (if living) and the heirs. If the house sells for less than the amount borrowed, HUD will pay the lender the difference.

It should be noted that reverse mortgage funds will not affect Social Security benefits, SSI, Medicaid, Medicare or pension plans. A person can receive funds from a reverse home loan and still maintain eligibility for these programs.

You can choose to use the funds from this loan in anyway you see fit. You can also choose to receive the money from the loan all at once, in monthly payments or as a line of credit. If you decide later on that you’d prefer a different method, you can always change.

These loans are available through most banks and credit unions. I find the online companies to have the best rates. Lending services, HUD and online lenders like Lending Tree also offer this type of loan.

For more information on reverse mortgages, and any of your other mortgage needs, follow this link to see the current offers available.