Top 10 Benefits of a Reverse Mortgage

It's important to stretch your dollars as much as possible as you near retirement. More Americans than ever are deciding that reverse mortgages can help them pay for their expenses and have the security of keeping their home, even long after they quit working. A reverse mortgage loan can put your home equity to work so you can receive additional income. Here are the top 10 benefits of a reverse mortgage.

1. You'll have a new stream of income. Reverse mortgages are set up to help folks 62 and older receive a cash payment in exchange for equity in their home. The older you are, the more money you'll be eligible to receive. Although reverse mortgages have pros and cons, this type of home loan can help people who just don't seem to have enough income for all of their expenses. Whether you have high medical bills, need long-term care insurance, need to repair your home, or want some extra spending money, a reverse mortgage could help you realize your financial goals.
2. You can have access to money. even though your retirement account may have taken a huge hit during the current recession. About 44% of workers 50 and up said they plan to delay retirement, largely because of investment losses in retirement accounts, according to a survey by Watson Wyatt, a consulting firm.
3. You choose how you receive the mortgage proceeds. When you apply for a reverse mortgage you'll have the option of choosing whether you want to receive the money as a lump sum payout, through regular payments, or a combination of both. Some loans, like HUD's Home Equity Conversion Mortgage (HECM), offer a line of credit that can be used whenever you need cash.
4. You don't have to repay the reverse mortgage until you leave your home. As long as you keep up the insurance and tax payments, you can stay in the home as long as it's your principal residence. Keep in mind that if you owe money on a reverse mortgage when you die, your heirs will either have to sell the house to pay back the loan or pay it back out of their own pockets. But they / you would never owe more on a reverse mortgage than the current appraised value of your home.
5. No credit qualifying--HECMs pay you, not the other way around Getting approved for a reverse mortgage won't depend upon your credit score, so you could qualify for a loan even if you don't have the best credit.
6. You can still receive government benefits such as Social Security or Medicare. Furthermore, advances from reverse mortgages are not taxable.
7. You can use a reverse mortgage to buy a house with the HUD purchase reverse mortgage program. This can be especially useful if you want to downsize to a less expensive home. The HECM for Purchase is not for buying investment properties, only a principal residence. However, you can purchase a one- to four-family house as long as it is you live there.
8. There are no income qualifying requirements for obtaining a reverse mortgage. In fact, it doesn't matter what your current income is to qualify. With a regular mortgage or home equity loan, you would need to meet debt-to-income requirements in order to borrow money.
9. HUD reverse mortgages (HECMs) are regulated by the Federal Housing Administration (FHA). Condos and manufactured homes that are approved by HUD and meet FHA requirements can also be financed with an HECM loan. Fees are also limited by law.
10. A reverse mortgage could help you avoid foreclosure. Foreclosure filings rose 18% in May 2009 from a year earlier, according to RealtyTrac. Even people who own their home outright could end up facing foreclosure if they get behind with their real estate tax payments.

Financial fads come and go, but reverse mortgages have shaped up to be more than a fad. Reverse mortgages have been around since the late 80s but have really picked up steam in recent years as more seniors have found themselves coping with high expenses, plunging home values, or the threat of foreclosure.

You must receive counseling from a reverse mortgage specialist before signing up. So you'll receive the help you need to determine if a reverse mortgage loan is a smart move. HUD has a list of approved reverse mortgage counselors.

Francine Huff
Francine Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows. Visit her Web sites www.Huffwrites.com and http://supersavvyspender.blogspot.com/.