Reverse mortgages have pros and cons. Although a reverse loan may have been the perfect solution for someone you know, it may not be the right financial product for you. Take a look at some frequently asked questions about reverse home mortgages.

Will the Bank Own My Home?

When you borrow a reverse loan the bank does not own your home. You continue to hold the deed to your house and are responsible for paying property taxes and insurance. Home improvements and repairs can be made as needed, and you can leave your home to your kids as an inheritance.

Can I Take a Reverse Mortgage with My Spouse Even though I Am Under 62?

No, you cannot. Reverse mortgages are only available to people who are 62 and up. However, if your spouse meets the age requirement, he or she can apply for a reverse loan. Your name would have to be removed from the deed to your home in order for your spouse to take on a reverse mortgage. Upon your spouse’s death, the reverse mortgage would have to be repaid if you wanted to stay in the home.

Does My Home Have to Be Paid Off to Qualify for a Reverse Loan?

Your house does not need to be completely paid off. If you have equity in your home you may be able to get a reverse loan. The amount of money your receive is based on the amount of that home equity, your age, and current interest rates.

Are Reverse Mortgages Only Available to Low Income People?

You can apply for a reverse mortgage no matter what your income is. It is true that many seniors who apply for reverse mortgages do so because they need to supplement their income so they can pay bills. But even if you have a healthy retirement account and aren’t struggling financially you can choose to get a reverse loan.

Get free, no commitment reverse mortgage quotes from a trusted network of lenders.

The flood of foreclosures is continuing across the U.S. Last year 2.8 million properties received foreclosure notices, according to RealtyTrac. Nevada, Arizona, and Florida — states that traditionally attract a lot of retirees — had the highest foreclosure rates in 2009.

Can a Reverse Loan Help You Stay in Your Home?

You may be facing the threat of foreclosure and looking for any number of possible solutions. If you are over 62, a reverse mortgage could be helpful. Talk with a reverse loan counselor to discuss your options and to determine how much you might be able to borrow. There also may be other alternatives to getting a reverse home mortgage that may help your situation.

Avoid Foreclosure Any Way You Can

In the meantime, consider the following tips to avoid foreclosure.

• You must continue making payments on a mortgage. Once you continue to miss payments your mortgage lender may move to repossess the home, forcing you to move.
• If you owe more on your property than it is worth when you default, the mortgage lender could pursue a deficiency judgment. Not only would you lose your home, but you could end up owing additional money.
• Open all correspondence from your mortgage lender and do not ignore phone calls. There may be a way to work out a new payment plan, loan modification, refinance, or some other solution to your problems.
• Do not abandon your home. Strategic defaults have become more common, and accounted for a quarter of all defaults in 2009, according to U.S. News & World Report. It’s a bad idea to walk away from a property because it’s worth less than what is owed on a mortgage for many reasons, including the fact doing so guarantees you’ll have a horrible credit history for many years.

Do whatever you can to stay in your home. If staying there is impossible, work like crazy to sell it rather than go down the road to foreclosure.

Proceeds from a reverse home mortgage can be used to repair and upgrade your home. So what type of home improvement projects should you consider doing?

Reverse Mortgage Money Needs to Stretch

Before even getting down to the business of home improvement, it’s important to note that you should never spend reverse mortgage money without first sitting down and budgeting it. Withdrawing equity from your home is a big deal, so it’s imperative that you really think about how to best use reverse loan money. Avoid using your funds for unnecessary projects and instead focus on improvements that can help you live comfortably in your home as you age. Here are a few repairs you may want to consider.

Replace Old Windows

Rickety old windows can be a drain on your energy bill. High heating and cooling bills can really burden a person with a fixed income. However, before you write a check from your reverse mortgage funds, check with agencies that work with seniors in your community to see if they have any programs that help seniors with this type of home improvement. Also, look into getting a free energy audit of your home through your local utility to find out exactly where heat is being lost in your home.

Preventing Slips and Falls

Broken walkways and stairs can be a hazard for anyone, especially elderly people. Getting in and out of your home safely is important, so using reverse mortgage money to make these repairs can help you avoid falling and running up huge medical bills. Installing rails in the bathtub or shower can also prevent slips and falls. Look around your home to pinpoint areas that you can make safer.

Make smart decisions about using reverse mortgage money so that you can continue to live in your home independently. Look for reverse loan quotes here to decide if this type of loan can help you.

If you’re struggling with debt, you may be tempted to go out and apply for a reverse loan. But there may be other options for paying off your bills that don’t involve cashing in your home equity with a reverse loan. One solution involves settling debt with your creditors.

What Is Debt Settlement?

Settling debt has become more common as the economy has struggled. Debt settlement occurs when a creditor agrees to accept less than what you owe on credit cards, medical debt, or loans. Generally, you have to offer some kind of lump sum payment or work out a payment plan. When you work with a debt management firm it may require that you make monthly payments into an account with their company. Once you’ve accumulated enough money, the funds are used to pay off the negotiated amount you owe.

You Can Settle Debt Yourself

You’ve probably seen ads for debt settlement companies that offer to negotiate with creditors. But most people can actually negotiate with their creditors themselves. If you choose to use a debt settlement firm, take the time to check out their reputation before signing any contracts. Be leery of putting funds into an account not controlled by you. Avoid using companies that require you to make large upfront payments, or advance fees, to use their services.

Reverse Mortgages and Debt

Some seniors successfully use reverse home mortgages to pay off debt. Before you go this route, have a housing counselor discuss reverse mortgages pros and cons. While you can use the proceeds from a reverse loan for paying off debt or any other purpose, it’s important to look at all your options to decide if this is the smartest move for your situation. You can get an idea of how much money you might be able to borrow with a reverse mortgage here.

About 63% of people 55 and up plan to age in their current homes, 12% plan to buy another house, and 26% are unsure what they’ll do, according to a survey by the National Association of Home Builders and MetLife Mature Market Institute. Depending upon the circumstances, a reverse mortgage loan could help some of these people live more comfortably.

Reverse Mortgages Help Homeowners Stay Independent

Many seniors fear losing their independence as they age. A reverse home loan is a tool that can help you stay in your home and avoid being financially dependent on family members. The money, paid as a lump sum or in installments, can be a lifeline if you have a fixed income.

HECM Can Be Used to Purchase Home

The Home Equity Conversion Mortgage (HECM) can be used if you want to downsize or relocate. You can use reverse loan proceeds to buy another house as long as it is going to be your principal residence. The money can’t be used for a vacation home or investment property.

Reverse Mortgages for the Undecided

Even if you don’t know if you want to stay in your current home for the long-term, a reverse mortgage could still be useful. Among the reasons you might need access to cash are to repair and upgrade your home if you think you might sell, to purchase a long-term care policy, or to consolidate debt. Of course you aren’t limited to those particular uses. A reverse mortgage can be used for any purpose.

Shop around and compare reverse mortgage quotes to get an idea of how much you might be able to borrow. The older you are and the more your home is worth, the more reverse mortgage money you would qualify to borrow.

A reverse mortgage broker from California received a six-year prison sentence after scamming a woman out of her reverse mortgage proceeds. John McTaggert helped an 86-year-old woman close on a reverse mortgage, then deposited the funds into his own bank account, according to Reverse Mortgage Daily.

The broker led the woman to believe the money was being invested in annuities. After he deposited the money in his account, he sent her $500 “dividend” checks each month. She became suspicious when she noticed that the checks were coming directly from the reverse mortgage broker and not an insurance company.

The case isn’t isolated and highlights the potential for various types of reverse mortgage fraud. Here are some of the reverse mortgage scams to watch out for:

• Getting seniors to pay for information that is actually provided free by the Department of Housing and Urban Development (HUD). It’s not uncommon for seniors to be charged 6% to 10% of the amount borrowed for a reverse mortgage as part of an estate planning program.
• Stealing home equity from seniors. This may involved flipping homes and using seniors to pose as straw buyers, or people who apply for a reverse mortgage to take out all the equity before the home is then resold to another buyer.
• Some equity-stripping schemes involve offering free homes to seniors or foreclosure assistance to supposedly help them stay in their homes. Many times these scams are targeted at people through churches, investment seminars, TV and radio ads, or direct mail, according to the Federal Bureau of Investigation.

To avoid being taken in by fraud, always be skeptical of claims that sound too good to be true. Avoid doing business with companies you’ve never heard of or who contact you and pressure you to sign up for their products on the spot. Never sign documents that you don’t fully understand. Have an attorney review the paperwork with you if necessary.

A reverse mortgage may seem like a golden ticket to financial freedom. But it’s important to understand reverse mortgage pros and cons before signing up because these loans won’t help everyone.

Reverse Mortgage Can Put Cash in Your Pocket

Yes, a reverse loan can supplement your income. The additional funds can give you money to pay medical bills, wipe out debt, or make home improvements. The money should not be used for frivolous purchases and needs to be budgeted wisely.

Cashing Out Home Equity

If you’re house rich and cash poor a reverse mortgage can help you cash out some of your home equity. The amount you can borrow depends upon your age, home value, and current mortgage rates. The older you are and more your home is worth, the more you qualify to get. But one of the cons of these loans is that you generally can’t borrow the full amount of your home equity. Depending upon where you live, the maximum loan amount you can get for a Home Equity Conversion Mortgage (HECM) is $625,500.

Reverse Loan Does Not Replace Retirement Planning

Borrowing with a reverse home mortgage is not a substitute for planning for retirement. If you’ve already saved up for retirement, a reverse loan may simply be another tool on the path to financial freedom. Reverse mortgages won’t make up for not saving over the years, so if you don’t have much savings, you need to be very careful about how you spend reverse mortgage proceeds.

A housing counselor can discuss the best reverse mortgage for your situation, or whether it even makes sense to borrow with one. Keep in mind that depending upon your age, there is a good chance that you may live for many more years and need to make the proceeds from a reverse mortgage stretch a lot longer than you think.

Reverse mortgage counseling is required before applying for a loan. Generally, you pay a fee for counseling. But the Consumer Credit Counseling Service (CCCS) of Greater Atlanta is offering free reverse loan counseling sessions nationwide.

Reverse Mortgage Counseling Grant

The CCCS is able to offer the counseling sessions thanks to a $1.8 million grant from the U.S. Department of Housing and Urban Development. The free counseling is being offered through September.

“We hope seniors across the country will take advantage of this opportunity. Obtaining this free counseling from a reputable and qualified nonprofit agency will help them understand all aspects of a reverse mortgage loan, and make an informed decision that is best for their unique situation,” said Suzanne Boas, president of CCCS of Greater Atlanta.

Reverse Loans for Seniors

You can schedule a reverse mortgage counseling session if you are 62 or over and thinking of applying for a loan. You also can schedule a counseling session on behalf of an older relative if you are the caregiver or have a financial power of attorney. Visit the agency’s Web site or call 866-616-3716 to schedule an appointment. Counseling sessions can be done by phone or in person.

Who Gives Counseling

Counselors who discuss reverse home loans are college graduates, have passed the HUD-approved Home Equity Conversion Mortgage (HECM) qualification exam, and take reverse mortgage education classes. Reverse loan counselors should be able to discuss all reverse mortgage guidelines so that you have a good understanding of how these loans work. They also should discuss reverse mortgages pros and cons so that you can make an informed decision about whether or not to borrow money.

Your reverse loan counselor also should discuss other options that don’t involve reverse mortgages but that may help your overall financial situation.

Are you still making monthly payments on a mortgage? If so, you may have wondered whether it makes sense to refinance your loan or try to get a reverse mortgage to get a better grip on your finances. Here are some things to consider before taking either step.

1. A housing counselor can discuss reverse mortgages pros and cons with you. A reverse loan counselor should also discuss other alternatives, such as refinancing or budgeting your money better.
2. Refinancing means you still need to make monthly payments on a mortgage. So you either need to continue working or have enough income saved up to pay on a home loan.
3. Reverse loans put money in your pocket. The amount you can borrow depends upon your age, home’s value, and mortgage rates. The money can be used for any purpose and doesn’t have to be repaid until you move or die.
4. Mortgage rates seem to be on their way up. Traditional 30-year mortgage rates could rise to 5.7% by the end of this year, according to the Mortgage Banker’s Association. Keep that in mind if you’re thinking of refinancing. If you wait too long to refinance, you could end up with higher monthly payments than you want.
5. You may not qualify for a cash-out refinance. Generally, only people with excellent credit, healthy incomes, and significant home equity can get such deals these days.
6. Reverse loans tend to have more fees than a refinance. Shop around to compare reverse loan deals to get an idea of the types of closing fees involved. You should also shop around for refinance quotes if you still think this might be an option.

When comparing all your options it’s important to look at the overall impact a reverse mortgage or refinance can have on your lifestyle. Don’t look for a quick fix. Deciding whether to use any type of loan requires careful planning for the long term.

Reverse mortgages have helped many seniors stay in their homes. But in some cases it may make more sense to sell your home and become a renter. Here are some things to consider when making this big decision.

Reverse Mortgages Pay You Cash

A reverse mortgage loan puts money in your pocket and lets you keep your home. The cash can be taken in a lump sum payment or in installments. Becoming a renter means you have to make monthly payments to a landlord. Even if you sell your home and expect to use the proceeds to pay for housing costs, you need to budget your money carefully. Your income must stretch to cover rent and other expenses for the rest of your life.

Rental Prices Have Declined

U.S. apartment vacancies are at a 30-year high, causing some landlords to lower rental rates to attract tenants. As a renter you may have more negotiating power now to get an affordable lease and other incentives. Rents dropped 3% last year, according to data from Reis Inc., a New York research firm.

Reverse Mortgage Heirs

Keeping your home with the help of a reverse mortgage means you have something to leave to your heirs. While a reverse loan must be repaid after you die, your heirs can choose to keep the property or pocket the proceeds from selling it after the loan has been repaid. Obviously, you can’t leave a rental apartment to your heirs.

Reverse Mortgage Pros and Cons

A reverse mortgage counselor can help you learn more about the pros and cons of this type of loan. A knowledgeable counselor should also discuss other alternatives to getting a reverse loan, such as renting or assistance for the elderly that is available through community agencies.

Taking time to research any financial product you’re thinking of using can help avoid problems down the line. Doing your homework also helps you get all the facts before committing to anything. Here are four myths about reverse mortgages and why they aren’t true.

Myth #1: The bank owns your home when you get a reverse mortgage.

The fact is that even if you borrow a reverse mortgage loan your name stays on the title. You can choose to make repairs or upgrades as needed. If anyone tries to get you to sign over the title to your home to obtain a reverse loan, they’re running a scam.

Myth #2: You don’t need a property appraisal to get a reverse loan.

You must have a property appraisal to get a reverse mortgage. The amount you can borrow is based upon the value of your home, your age, and current reverse mortgage rates. An appraisal can cost about $350 to $500, and you don;t get to choose the appraiser.

Myth #3: You can’t leave the home to your heirs.

You don’t have to repay money borrowed until you move from your home or die. After you die your heirs can choose to sell the home, repay the reverse mortgage, and pocket any profit. Reverse mortgage heirs also can choose to repay the amount you borrowed and keep the home. If your heirs do nothing and walk away from the home, the reverse mortgage lender takes the title–if the loan balance exceeds the home’s value, your heirs are not required to pay the difference.

Myth #4: A reverse mortgage can solve all your financial problems.

Reverse mortgages can certainly help you increase your income, but they aren’t a cure-all for every problem. It’s important to discuss reverse mortgages pros and cons with a qualified housing counselor. While a reverse loan may be perfect for your neighbor, it may not be the right move for you.

Begin your search here to compare reverse mortgage quotes and get more information.

A reverse mortgage can put cash in your pocket. But anyone considering signing up for a reverse home mortgage should understand that it is a rising debt loan. Here’s how reverse mortgages compare to traditional home loans.

Drawing on Home Equity

A reverse loan allows you to convert home equity to cash. When you take cash out of your home, the amount of equity you have decreases. A traditional mortgage is used to purchase a property and the balance decreases over time as you make payments toward the principal. Your home equity increases as the amount of mortgage debt you owe decreases.

Reverse Mortgage Closing Costs

Both types of loans have closing costs involved. Out of pocket expenses associated with a traditional forward mortgage can be very high depending upon the amount of any down payment. Reverse mortgages also have closing costs, but no down payment is required. Closing costs on regular refinance mortgages and reverse loans can be wrapped into financing.

Monthly Payments

With a forward mortgage you have to make payments each month toward principal and interest. Your mortgage payment also may include money for real estate taxes and property insurance. Reverse mortgages pay you in a lump sum or in installments. You make tax and insurance payments on your own. If you don’t keep up those payments the reverse mortgage lender can force you to repay your loan early.

Second Liens

Reverse mortgage lenders don’t allow borrowers to have second liens on their properties with the home equity conversion mortgage (HECM). If you have a second lien on your home, it must be paid off before or at the reverse mortgage closing. Depending upon your income and other factors, you may be able to keep a second lien on your home when doing a mortgage refinance.