Use Reverse Mortgage on Your Next Home Purchase

In case you are over 62 years of age and own a house, there’s a wonderful way to supplement your retrial income by way of taking a reverse mortgage loan on your home. Yes, don’t be surprised, you can continue to stay in the home that you own and mortgage it to earn from your home. Your home could be your best friend and financer and would stand by you to provide that you that additional money and comfort that you look for when you are in your sixties. You could make use of this facility even when you have a mortgage continuing on your current home.

So what is a reverse mortgage loan and how does the process work? Prior to January 2009, it was difficult for home owners to cash out on their home equity even after they had been repaying their mortgage in time over the past several years. This all changed with federal government allowing Reverse Mortgage loan wherein elderly people were allowed to mortgage their home equity to receive cash. There are several modes and options available to an individual regarding the manner in which he would like the loan disbursed to him depending upon his need and lifestyle. In case one wants to supplement monthly retrial income, he could go in for a monthly payment option. Yet another option is to go in for lump sum payments in case the individual has an unplanned requirement in the form of medical expenses or any investment which requires huge sums of payment. There is a third option as well and that is to open a line of credit from which you could draw the money simply when it is required and keep the interest costs to a minimum. The reverse mortgagees are backed by the federal government and have proved a hit with senior citizens for its simplicity and flexibility. Typically you receive anywhere between 50-70% of the value your home when you go in for a reverse mortgage loan.

There has been a recently introduced revere mortgage type known as the Home Conversion Equity Mortgage (HECM) which makes it possible for the seniors to go ahead and purchase a home from the proceeds received from the reverse mortgage of their current home. This was allowed by the federal government as one of the ways and means of supporting the housing industry which was on the verge of collapse in early 2009. HECM is managed by the Federal Housing Administration and the idea works for those elderly people would have down payment to make for their new purchase and pay the balance amount from the lump sum amount received by reverse mortgaging their current home. The advantage his that he does not need to pay to the reverse mortgage lender in the form of any monthly payments to service the loan.

You still need to remember however, that reverse mortgage is still a loan and would need to be settled and paid for. The loan is settled in case of the death of the owner or whenever he decides to sell in the home in which case the outstanding loan amount is settled and the balance is retained by the seller or his heir.