The Home Equity Conversion Mortgage (HECM) is a reverse mortgage program offered by FHA, which allows senior citizens aged 62 and older the option to withdraw some of the equity they have in their home. Some senior citizens find reverse mortgages appealing as a supplement to Social Security or to meet unexpected medical expenses. Here is some information about reverse mortgages that will help you decide if a reverse mortgage could benefit you.

What is a reverse mortgage?

A reverse mortgage is a mortgage offered by the Federal government to senior citizens age 62 and over through a program overseen by HUD. Reverse mortgages allow homeowners to borrow a portion of the equity they have in their home by taking a lump sum payment, monthly payments, as a line of credit or in some cases a combination of all three. The homeowner is not obligated to repay the loan until the homeowner dies or the homeowner discontinues living in the home.

How is a reverse mortgage different from a conventional mortgage?

In a conventional mortgage the homeowner makes a monthly payment to the lender and some portion of the payment goes towards equity and the remaining portion goes towards interest paid for the loan. When the loan begins a higher percentage of each payment goes towards interest but over time the portion of the payment allocated to interests decreases until the loan is finally paid of. With a reverse mortgage the homeowner has no required monthly payments. All interest that accrues over the life of the loan is added to mortgage balance and paid off after the homeowner dies.

What are the requirements for getting a reverse mortgage?

In order to qualify for a reverse mortgage the homeowner must:

1. Be 62 years old or older

2. Live in the home

3. Own the home free and clear (or have a small mortgage left on the home that can be paid off with the proceeds from the reverse loan)

What types of homes are eligible for reverse mortgages?

Only single family homes, duplexes, triplexes, quadplexes, and HUD approved condominiums/ manufactured homes that meet FHA requirements are eligible.

At the end of the day deciding whether or not to take advantage of the reverse mortgage program is a personal decision that varies with each individual’s unique circumstances. Reverse mortgages are tricky but can be beneficial in certain situations. Obviously the decision requires some serious analysis before any commitments are made. There are many websites on the internet that can help you assess the pros and cons of reverse mortgages and even to calculate whether or not a reverse mortgage makes sense for you. If you still feel uneasy you can seek the advice of a mortgage or real estate expert who will be able to run numbers and provide an exhaustive analysis of the costs and benefits of reverse mortgages. Finally, more information about the Home Equity Conversion Mortgage (HECM) is available on the FHA and HUD websites.

Understanding real estate can seem daunting but is really pretty simple if you read and follow this advice from Philadelphia Real Estate agent Frank L. DeFazio. Frank has extensive background in all types of Center City Real Estate transactions.

Understanding mortgages can seem daunting but is really pretty simple if you read and follow the advice from Philadelphia Real Estate agent Frank L. DeFazio. Visit Frank at http://www.CenterCityTeam.com

Author Bio: Understanding real estate can seem daunting but is really pretty simple if you read and follow this advice from Philadelphia Real Estate agent Frank L. DeFazio. Frank has extensive background in all types of Center City Real Estate transactions.

Category: Finances
Keywords: reverse mortgage, reverse mortgages, mortgage, mortgages, loans, home loan