The Reverse Mortgage Loan Explained
by Brandon Cornett
If you are a senior citizen over
the age of 60, and you own a home,
I'm willing to bet you've been hearing
about reverse mortgage loans lately.
But why is this lending option so
popular among seniors lately, and
how does it work anyway? Let's take
What is a Reverse Mortgage Anyway?
It's a type of loan that is made
against that value of your home.
In this way, it's similar to a home
equity loan. But the similarities
end there. With a reverse mortgage,
the borrower does not have to pay
the loan back for as long as they
live in the home. So in essence,
it's a way for senior citizens to
convert the value of their homes
into cash, and without having to
repay it right away.
This unique lending option is typically
aimed at senior citizens who own
their own homes. In fact, the HUD
reverse mortgage program (one of
the first of its kind) actually has
a strict age requirement -- applicants
must be at least 62 years old for
this federally insured program.
As of this writing, the HUD program
is one of the most popular. In addition
to being 62 or older, applicants
for a HUD reverse mortgage must either
own the home outright or have a low
mortgage balance that can be paid
off at closing (with part of the
proceeds from the loan).
How Much Can I Borrow?
Here again, the amount will differ
from one lender to the next. But
in general, the amount you can borrow
on this type of mortgage will depend
on several factors:
1. Your age
2. The current interest rates
3. The appraised value of your home
This means that people who are older,
who have more valuable homes, and
who borrow when rates are lower will
qualify for a higher amount (generally
speaking, of course).
When Do I Pay It Back?
First, keep in mind that the exact
details of a reverse mortgage will
vary from one lending institution
to the next. In most cases, you do
not have to pay anything back until
(A) you die, (B) you sell the home,
or (C) your move out of the home.
In other words, the loan will have
to be paid back when the home is
no longer your primary residence,
for whatever reason. When one of
these conditions has occurred, and
the loan repayment is due, you (or
your estate) will have to repay the
amount borrowed plus any lending
Increasingly Popular Among Senior
The number of reverse mortgages
has been rising steadily over the
last few years. One reason for this
is that there's a larger pool of
potential borrowers each year, because
the number of seniors 62 and older
is increasing (better medical treatment,
better health, etc.). Another reason
for the growing popularity has to
do with good old-fashioned marketing.
The lenders that offer these programs
have been pretty active in their
marketing efforts lately.
As a result of these and other factors,
the number of seniors pursuing this
lending option has increased significantly
over the last few years. For example,
from 2005 - 2006 there was a 56%
increase in the number of reverse
mortgages granted to senior citizens
in the United States.
About the Author: Brandon
Cornett publishes the Mortgage
Refinance Blog and several other
real estate websites. Visit the author
online at http://www.mortgage-refinance-advice.com/blog/