Justin Perry's Mortgage Blog

Recently Congress passed a housing rescue package that was primarily geared towards slowing down foreclosure rates, decreasing mortgage defaults and stop the bleeding from Fannie Mae and Freddie Mac. But what most people don't know is that the bill also contained provisions to make it easier and more affordable for seniors to get reverse mortgages.

These once exotic products have become exponentially more popular over the past decade. This is mostly because of their low interest rates and the old days of rising equity. The Federal Government backs 90% of reverse mortgages through the Home Equity Conversion Mortgage or HECM program. Seniors nowadays have less and less in savings and with pensions becoming a thing of the past, reverse mortgages are going to continue their explosive growth. While some reverse mortgages do have lower interest rates than traditional "forward" mortgages they can be more complicated than a conventional mortgage so you need to do your homework.

Reverse mortgages are very similar to home-equity loans in several ways. First, they're available only to people age 62 and older. The amount you can borrow depends on your age, the value of your home, and interest rates (check out AARP's calculator at rmaarp.com for an estimate). You can choose to receive your money in monthly installments, a lump sum, or a line of credit. There are no monthly payments to make - and therefore you don't have to meet an income requirement to qualify.

In fact, you needn't repay the loan until you move out of your house, sell it, or die: The debt is settled with the proceeds from the sale of your home. If there's money left over, it goes to you or your heirs. But what if your house sells for less than what you owe? (That's not an idle question in a time of plunging home prices.) Don't worry. The federal government covers any shortfall for HECM loans, and for others the mortgage holder simply eats the loss.

If you are interested in learning more about reverse mortgages either for yourself or for a loved one please contact me so we can setup a free reverse mortgage consultation.