Reverse Mortgages: How they are helping senior homeowners move forward
Baltimore, Maryland - Senior homeowners across the nation are now turning to a new source for cash income: their home. From paying for home maintenance to taking a well deserved vacation - or even paying for home healthcare expenses, now, more than ever, Reverse Mortgages are providing the means for seniors to move forward in life.
With a Reverse Mortgage, homeowners at least 62 years in age, are now able to capitalize on the equity they have in their homes to be used as the basis to qualify for a Fannie Mae or FHA type loan. Unlike traditional home equity loans, this one does not have to be repaid until the homeowner permanently leaves the residence. “We feel that the Reverse Mortgage is allowing seniors to tap into a cash source previously unrealized which helps them pay for anticipated or even unexpected expenses, “ said Brett Carter, President of Next Generation Financial Services. “As long as the senior owns their home, there is no reason why they should go without a reverse mortgage - if they need it.”
The program is based primarily on three areas: the age of the youngest borrower, amount of equity in the home and interest rates. The older the borrower, the more money they will be able to receive. Proceeds from the loan can be received in the form of a lump sum, monthly payments, a line of credit or even a combination of monthly payments and a line of credit. The borrower has the luxury to select how they will receive the funds- it all depends upon the nature of the financial need. However, the most popular form of disbursement is the line of credit. The reason for the prevalence of this type of disbursement if because under the Reverse Mortgage program, the line of credit actually increases as the months go by.
So what’s the catch? Simply that there will not be as much equity in the home for the heirs after the home passes into estate. However, several seniors have indicated that because their children have their own homes, this isn’t really a great worry to them. Because the lender can only derive repayment from the property itself, the borrower and heirs have no responsibility for repayment of the loan. Even if the property is not worth enough to completely pay off the loan, the loans are backed by mortgage insurance, which will pay the difference, if any.
Reverse mortgages are allowing seniors the opportunity to make the homestead that they have taken care of for so many years, now take care of them in return instead of letting one of their greatest assets go to waste, they are making it work for them. In summary, these seniors are allowing the reverse mortgage to help them move forward and take advantage of the good things life has to offer.
Next Generation Financial Services is a 1st Mariner Bank joint venture created to bring new and unique applications of financial products to the market. 1st Mariner Bank is a leading mortgage lender in the mid-Atlantic region originating over $1 billion annually. 1st Mariner Bank is ranked as one of the top 100 fastest growing businesses by Fortune Small Business magazine.
REVERSE MORTGAGES: MYTHS AND MISPERCEPTIONS
- Myth#1 - The Lender Will Own My Home. This first myth is false because the homeowner retains the title to the home during the entire life of the reverse mortgage. The lender never takes control of the title.
- Myth #2 - My Heirs Will Be Responsible for Repaying the Loan. This statement is incorrect because the reverse mortgage is a Non-Recourse Loan; the lender will only receive repayment of the loan from the proceeds of the sale of the property. The Lender cannot look to the estate for repayment of the loan.
- Myth #3 - The Lender Cannot Wait for Me to Get Out of My House So the Loan Can Be Repaid. This myth is also untrue. Reverse mortgage lenders are not in the business of selling homes. However, they are in the business of helping seniors keep their homes and find options that allow them to maintain their financial independence. Reverse mortgage borrowers may remain in the home for as long as they wish. However, if they decide to sell their home for any reason them the loan will become due and payable at that time.
- Myth #4 - I need to make a certain amount of money or have good credit to quality. This belief is common but also untrue. The mortgage has no income or credit requirements.
- Myth #5 - Once I take a reverse mortgage, the Lender can foreclose on my home for any reason. This is another reverse mortgage inaccuracy. On an industry wide basis, all lenders will work with the borrower(s) to ensure this scenario does not happen. However, there are circumstances, which might cause a Lender to consider foreclosure: if the insurance and taxes are not paid, the home is not maintained properly of if the homeowner is absent from the home for twelve consecutive months.
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