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Equity Conversion Mortgage / Reversible Mortgage
First of all, what is a Reversible Mortgage? It’s exactly what it
says it is. Instead of you making a payment to your banker, your banker
pays a monthly payment or lump sum to you. You may be thinking why would
a lender even consider this. Well, given this loan is a Home Equity Conversion
Mortgage (HECM) the money is backed by home equity. The Home Equity Conversion
Mortgage, authorized in 1987 is the only reverse mortgage that is insured
by the Federal Housing Administration, which is part of the U.S. Housing
and Urban Development (HUD). It was the first widely available reverse
mortgage in the United States. To get this type of mortgage there are
a couple pre-qualifiers you must pass.
These include:
- You must
be at least 62 years old
- You must
be a home owner
This mortgage
is a great way for seniors to free up the money locked in the value of
their home to maintain or improve their standard of living. Some additional
advantages of a Home Equity Conversion Mortgage are
- No income
or credit information is required of persons over the age of 62
- No monthly
payments need to be made, in fact, no repayment is ever required as
long as the home is the borrower’s primary residence
- There
is no change in the title of property, which is passed to one’s
heirs
The HECM,
specifically, provides a lot more cash than other programs, as well as
gives you more options for receiving the money. You may receive cash,
a line of credit, or a monthly check. Most people use the Home Equity
Conversion Mortgage to receive a payment each month for the rest of their
lives The interest rate on a reverse mortgage is an adjustable rate that
fluctuates monthly or yearly. The amount a senior homeowner can borrow
through an HECM depends on the borrower’s age, the current interest
rates, and the value of the home.
It is important to remember that a reverse mortgage is different from
a home equity loan or a line of credit. With a home equity loan or line
of credit an applicant must meet certain income and credit requirements,
begin monthly payments right away, and the home can have an existing first
mortgage on it. Also, there is no age restriction such as there is with
an HECM. Unlike a Home Equity Mortgage, a reverse mortgage doesn't require
monthly payments from the borrower to the lender. A reverse mortgage is
not repayable until the borrower no longer occupies the home as his/her
primary residence. This may occur when the last remaining borrower dies
or sells the home.
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