Reverse Mortgage Guide

The Los Angeles Times has published an interesting article entitled Reverse mortgages provide more seniors with a safety net.

“With traditional home equity credit lines increasingly difficult to get in a time of declining home values and tight underwriting standards, eligible seniors older than 62 are finding that one benefit of reverse mortgages — other than no pre-payment penalties and no credit or income qualifications — is the ability to get rid of the sub-prime and other adjustable loans facing payment increases.”

The article also says that “In general, eligible properties for the FHA program must be a principal residence and can include single-family homes, condominiums, manufactured homes built after 1976 or even two- to four-unit multifamily properties. Besides borrowers retaining ownership of the home for the duration of the loan, cash advances can be used for any purpose and don’t count as income against Social Security or Medicare benefits — although it can affect Medicaid and other state or federal assistance, so it’s definitely best to check details with an attorney or local expert.”

Another point is that “As promising as they sound, however, reverse mortgages do have limitations. Since borrowers need to be at least 62, it can get complicated when one spouse is younger than that. Although some borrowers have solved this problem by transferring the ineligible spouse’s interest in the home into a trust, such a plan can backfire when the eligible spouse dies, which would require the original loan amount, all interest charges and fees to be repaid.

Actually, there are some reverse mortgage programs which allow borrowers who are age 60.

“Homeowners who are currently in bankruptcy do not qualify, neither do owners of most mobile homes, co-ops or homes on leased land. And even for those owning eligible property types, there has to be sufficient equity remaining in the home after other mortgages and home-equity lines are paid off to close the deal, in which case a traditional home-equity line may suffice. Consequently, experts often counsel applicants to discuss options with their extended families before moving forward.”

This article is well done, with examples, pros and cons.

For the full story, see: Reverse mortgages provide more seniors with a safety net.

This entry was posted on Thursday, February 28th, 2008 at 3:13 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.