For many Americans reaching the retirement age Easton Stick Jersey , the equity build up in their home is their only real asset. Reverse mortgage is a way to tap into this asset and create a stream of income needed for retirement or take care of an unexpected financial need that is usually related to health care costs in the elderly.


Reverse mortgage is not like a refinance, equity loan or a second loan on your home and there are some pitfalls.


So what is a reverse mortgage?


As the term implies the flow of money is reversed. Instead of the homeowner paying the lender on a predetermined schedule, the lender pays the homeowner and there aren't any payments due until the home owner moves or dies.


How did reverse mortgage start?


Roger Maris broke Babe Ruth's single-season home-run record in 1961 but like most things in life Drue Tranquill Jersey , a single act of kindness has a much longer longevity and a more widespread influence than that of fame and ironically these acts of kindness remain obscure.


The history of reverse mortgage can be traced to Nelson Haynes of Deering Savings & Loan (Portland, ME) who made the first reverse mortgage loan to Nellie Young, the widow of his high school football coach. This event was reported to be motivated by kindness and started a chain of events over the following forty years to extend a helping hand to today's retirees.


Reverse mortgage helps many retirees cope with their financial difficulties and more importantly have a way to retain their independence and dignity. And retirees are reaching for this solution in record numbers. According to the National Reverse Mortgage Lenders Association in 2004 Nasir Adderley Jersey , lenders originated a record 37,829 HECM loans during the most recent federal fiscal year - a 109 percent increase over the 18,079 loans closed the previous year.


Why would a lender do this?


The act of kindness may have started this idea but lenders are not charitable organizations and they will not be in business long if they don't have a return on their investments. In this case Jerry Tillery Jersey , they calculate the amount they lend based on the value of your home, projected appreciation, your age and a number of other factors. They expect to get paid the money they have lend plus the interest when the homeowner moves or dies.


What are HECM Loans?


Federally-insured home equity conversion mortgage (HECM) is the most common of reverse mortgage loans that the U.S. Department of Housing and Urban Development started offering in 1989.


Who cares about federal insurance?


In traditional loans Mike Williams Jersey , when you borrow the money, you have the cash in hand and the lender has taken all the risk secured by your home. However in a reverse mortgage you may plan to receive a monthly payment over a period of time. What will happen if the lender is no longer around to pay you?


This is why the federally insured reverse mortgage ads another dimension of safety and peace of mind. This peace of mind also comes with a price tag. HECMs limits the maximum loan amount a homeowner can borrow.


What about Non-HECM?


Many lending institutions offer this category of reverse mortgages and their limits are usually higher than that of HEMD. However they are not federally insured and they can have a much higher expense associated with their processing.


Can any one qualify for a reverse mortgage?


The eligibility requirements for a reverse mortgage are:




You are a homeowner


You are 62 years of age or older


You own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan


You live in the home


In case of HUD Derwin James Jersey , you are also required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.


Upkeep of property taxes and staying out of bankruptcy are also required.


How much money can I borrow?


The amount of money you can borrow is based on a different set of formulas than the traditional mortgage qualifications. Your age, the value of your home, the current interest rates Joey Bosa Jersey , the loan costs impact the amount. Older individuals with more valuable homes in lower interest rate environment can borrow more.


What types of homes are eligible for reverse mortgages?


Single family, two-to-four unit properties, townhouses Melvin Gordon III Jersey , detached homes, units in condominiums and some manufactured homes are eligible. However various restrictions apply to all with most significant being that you own them, live in them and have kept them in reasonable condition.


What about my heirs?


If death occurs while you still owe money to the lender Philip Rivers Jersey , your heirs are obligated to pay the borrowed amount, plus interest and other fees, to the lender. They usually do this by selling the house. Whatever remains after paying the lender belongs to your heirs. The loan cannot be passed along.


What are my borrowing options?


You have five options:




Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.


Term - equal monthly payments for a fixed period of months selected.


Line of Credit - unscheduled payments or in installments LaDainian Tomlinson Jersey , at times and in amounts of borrower's choosing until the line of credit is exhausted.


Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.


Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.


What about reverse mortgage scams?


Like most other scams directed to senior citizens, telemarketing is on top of the l

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