Who Funds Reverse Mortgages?

Tips to take the mystery out of reverse mortgages so that you can make an intelligent decision.

Reverse mortgages have often been touted as a perfect solution for senior citizens needing extra income. Unlike traditional mortgages, reverse mortgages pay the senior citizen a set amount each month that she continues to live in her own home. This money is often touted as free money, but it actually is a loan. If a senior citizen moves out or dies, the loan immediately becomes repayable.

WHO FUNDS REVERSE MORTGAGES?

Most reverse mortgages are funded by the federal government. The Federal Housing Authority insures the loans, and they are often granted by the Department of Housing and Urban Development (HUD). For this reason, there are government guidelines about how much money a senior can receive, what types of homes qualify, and so forth. However, income received as part of the reverse mortgage plan does not affect the senior citizen’s Medicare, Social Security, or pension benefits. There are no limitations as to how the homeowner may spend money given him as part of this program.

WHO QUALIFIES FOR REVERSE MORTGAGES?

Reverse mortgages do not require a specific credit score or income level. The only requirement is that the applicant be over the age of 62 and own her own home. People living in manufactured homes in condo manufactured home communities or co-ops currently are ineligible for this program.

PAYING BACK THE LOAN

It is important to realize that reverse mortgages are loans. In the majority of cases, the loan is paid back by the senior citizen’s heirs after his death. In some cases, the senior may have to move elsewhere due to illness or changed family circumstances. If this happens, the loan immediately becomes payable.

PAYBACK OPTIONS

Usually, the senior citizen or her heirs has to sell the house in order to pay back the reverse mortgage. This is problematic if a senior wants to keep the house “in the family”. The senior citizen or his heirs can keep any proceeds from the sale of the house beyond the amount owed on the loan. In some cases, the homeowner or her heirs may be able to refinance the mortgage in order to be able to keep the house.

Related posts:

1. Am I Restricted On How I Use The Funds From A Reverse Mortgage?
2. Can I use the funds from a reverse mortgage any way I choose?
3. Can I Use The Funds From A Reverse Mortgage Any Way I Choose?
4. Should I Take A Reverse Mortgage Even If I Don’t Need The Funds Right Now?
5. Are There Restrictions On How I Use The Funds Received From A Reverse Mortgage?

This entry was posted on Wednesday, November 18th, 2009 at 8:54 am and is filed under reverse mortgage. 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.