Many people may not know as they get older, there is a way to get equity from their homes to pay for medical, living, or other expenses. Anyone age 62 or older can apply for a reverse mortgage, or another name for it is a home equity conversion mortgage.

In a reverse mortgage, a borrower would be receiving a monthly payment from their mortgage instead of making one. Simply put, people can use the equity they have in their homes to pay for other expenses.

So why would this even be beneficial to a person or family?

“For a person over the age of (62), it eliminates a debt that they have, it eliminates a payment for them every month, plus it gives them extra income,” said Melissa Martin, loan officer for First Colony Mortgage. “So not only do you not have a house payment anymore, you also have extra income.”

For those that are living on social security and a limited budget, it gives them extra income that will not affect their benefits in any way, Martin said.

Borrowers have the choice to either have the money come to you in monthly payments or there are some options to pull out a certain amount that can be used for medical bills, living expenses, vacation, etc.

The borrower will never owe more than the home is worth in a reverse mortgage because financers only allow a borrower to go up to 110 percent of the current home value when they finance the loan, said Martin. Over time, the home will appreciate in value, so the borrower can never receive more than the house is worth.

Reverse mortgages don’t have to be repaid until the borrower no longer occupies the house. If the borrower passes away, the family members have the choice to either refinance the home or they have approximately a year to sell the home.

“It’s not something that is going to become a burden to your children,” said Martin. “They have more than a sufficient amount of time to put it on the market and get it sold or to refinance it and then they could rent it out and it could bring them an income anyways.”

There are actually very few lenders that are able to offer reverse mortgages, and only three to five financial institutions will finance the loans. The two largest financial institutions that offer the loan are FHA and Fannie Mae.

In order to apply for the mortgage, first you need to know that the house being mortgaged must have a relatively low remaining balance on your current mortgage or be paid off.

Next, you need to find a qualified loan officer. Melissa Martin at First Colony Mortgage is one of the few in Washington County that is qualified to do such a loan. She will be able to assist you in deciding if a reverse mortgage is right for you and your situation.

One other requirement is borrowers must attend a one or two-hour counseling session or class to make sure they fully understand the loan and what it means for them.

The costs associated with the mortgage would be approximately the same for a refinance. There is an upfront application fee, but closing costs may be tied into the loan, so there may not be any other out-of-pocket expenses, said Martin.

For more information about reverse mortgages, visit the Fannie Mae Web site at www.fanniemae.com

This entry was posted on Friday, January 13th, 2006 at 12:34 pm and is filed under Reverse Mortgage News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.