Reverse Mortgages - How they work

June 23, 7:18 PMFort Worth Reverse Mortgage ExaminerRobert Griffin

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With basic living expenses slowly increasing mature Americans are often left wondering how they will supplement their current monthly income just to survive day-to-day.  Fortunately, the US Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA) created a program called the Home Equity Conversion Mortgage (HECM) or reverse mortgage.  The program was designed to allow mature Americans, age 62 years and older, remain in their home and use their home as equity to provide them with the additional income they need per month.

But how does the reverse mortgage program work for you?  Easy.  If you are a mature American and your current home is your primary residence then you may qualify for a reverse mortgage.  Here are the details of the requirements of the reverse mortgage program. 
• Must be at least 62 years or older. 
• Your home must be your primary residence and you must own the home.
• Your home must be paid off or have a low enough balance in order to qualify for the reverse mortgage.  

Now here is how the reverse mortgage program works:
First you should understand that a reverse mortgage is a loan where you borrow against the current equity in your primary residence.  With a reverse mortgage you do not make payments on the loan while you reside in the home.  You begin making payments once the home is no longer your primary residence.

Once you have met the requirements of the FHA reverse mortgage program which appeals to you, and there are some various choices available, you will either receive a lump sum, monthly payments, a line of credit or a combination of all three of these forms of payments.  Remember the equity in your home does not need to be paid back while the home is your primary residence.  And the money from your home is yours to do with as you please.  You do not have to worry about placing the money in an account you are unable to access for a specified amount of time. 

You are responsible for paying your property taxes and your homeowners insurance.  The only thing a reverse mortgage guarantees is that you are able to use the equity in your home for cash to either supplement your monthly income or to pay off some long standing medical or personal bills. 

Just like a traditional mortgage, a reverse mortgage has closing costs which you will be required to pay.  Keep in mind that some closing costs for a reverse mortgage are higher than normal but are often worth the added measure to secure your independence. 

You now must meet some conditions set forth by FHA and HUD prior to applying for a reverse mortgage to ensure you fully understand the requirements of the program.  Speaking with a HUD approved HECM counselor is now a mandatory requirement prior to the reverse mortgage program participation. 

You will be advised and may be limited in withdrawing all of the equity from your home.  Due to the new higher borrowing limits set by President Obama, your home may have more equitable value but again you may be cautioned or limited in the amount you can withdraw from your home due to the higher fees associated with a reverse mortgage.  The last thing either agency wants for you to experience is being ‘house rich and cash poor’.  Meaning you took out a reverse mortgage and your supplemental monthly income is still not allowing you to live the way you planned. 

Reverse mortgages have been around for more than 20 years and have proven to provide mature Americans, like you, with additional income in your time of need by using the equity in your primary residence.  The program offers a way to remain independent while having a more promising hope of financial stability. 

Robert Griffin specializes in reverse mortgages and has earned the accolade of No. 1 reverse mortgage broker in the Southwest for three years in a row. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). If you would like an information packet or would like to set up an appointment with one of our reverse mortgage specialists, call (866) 683-3690 or complete our online Reverse Mortgage Information.

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