This week’s Blog is being written by my friend Peter Davidson. He is an expert with reverse mortgages. We will be having a seminar on October 22, 2009, at 6:30 at my office (5590 North Academy Blvd.) Please call me at 593-2963 if after reading the following article if you would like to come. Please enjoy and we hope to see you soon!!

Thanks,

Brian

What is a Reverse Mortgage?

Simply put, a reverse mortgage is a loan that enables homeowners aged 62 and over to tap into their home equity.  www.ReverseMortgageGuides.org says “A reverse mortgage is a low-interest loan for senior homeowners that uses a home's equity as collateral. The loan amount is a percentage of the home's value determined by the age of the youngest homeowner. The loan does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 12 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not liable if the home sells for less than the balance of the reverse mortgage.”

History of Reverse Mortgages

Many people believe that reverse mortgages are fairly new, when actually the first reverse mortgage was done by Deering Savings & Loan in Maine during 1961.  Growth was very slow until 1988 when the Federal Housing Authority Insurance Program was signed into law.  The first government-insured reverse mortgage was given in 1989 under a pilot program initiated by the federal government under the guidance of the AARP.  The program was small to begin with, but was expanded nationwide due to its success.

Since then in excess of 400,000 reverse mortgages have been done in our country.

Why a Reverse Mortgage?

The FHA reverse mortgage was created to allow seniors to stay in their homes for the rest of their lives.  The homeowner can receive payments in a variety of ways; monthly payments, lump sum payment, line of credit, or any combination, and because they are receiving rather than paying, they can never be evicted or foreclosed on for non-payment.  Reverse mortgages are easy to qualify for because there are no credit or income requirements.

What Can Be Done With The Proceeds of a Reverse Mortgage?

According to a report on the 2006 AARP National Survey of Reverse Mortgage Shoppers, the top 5 uses of a reverse mortgage are:

Expenses for health or disability

Improve quality of life

Pay off debt

Home repairs and improvements

Everyday and emergency expenses

The proceeds are not taxable and the borrower can do almost anything they want with them.