I can't tell you how many times I would quickly turn the channel when I saw Robert Wagner or James Garner on TV touting Reverse Mortgages. I really like James Garner and I couldn't believe he was a spokesperson for what seemed to me to be another way to con seniors. But then, afterall, it was James Garner, he wouldn't con anyone.
I decided I had judged too quickly and so I launched my own investigation. I recently attended a workshop on Reverse Mortgages held by a local attorney in McCaysville, Jim Johnstone and here's what I learned:
What is a Reverse Mortgage? Unlike traditional home equity loans, the Reverse Mortgage is a home loan that allows seniors 62 years of age or older to use the equity in their home. It does not require payment of any kind until the last surviving borrower permanently leaves the home.
The Federal Housing Administration (FHA) Home Equity Conversion Mortgage or HECM is the most popular and is a government insured loan. A HECM has no payments, it is non-recourse (meaning the final amount of the loan will never exceed the value of the home) and it's a tax free line of credit - Tax Free! Also, closing costs are included in the financing of the loan. There may be a fee to initiate the loan, estimate $300.
What are the Requirements? A homeowner and all borrowers are at least 62 years old. There are no income or credit requirements.
How Much Money Does the Homeowner/Borrower Receive? Three factors determine the amount of eligible equity which may be converted to cash. They are:
- Age of the youngest borrower
- Value of the home
- Current interest rate
The older the borrower, the higher the value of the home, the more money the borrower gets.
How Safe are Reverse Mortgages? The homeowner/borrower retains ownership of the home and the lender never owns your home. The loan is non-recourse and protects heirs from taking money out of their pocket for repayment of the loan.
Will the Homeowner/Borrower Ever be Forced Out of Their Home? NO! As long as one of the borrowers continues to live in the home, adequate property insurance is maintained, the real estate tax is paid annually, and the home is kept in good condition, just like any traditional mortgage.
How Can a Homeowner/Borrower Receive the Money? The choice is completely up to the borrower. Receive it all in a lump sum, in regular monthly payments, or place the money in a growing line of credit. Or combine all three options.
Who Gets the Home when the Homeowner/Borrower Dies? The estate will receive the home upon the borrower's death, just like any traditional home loan. Heirs have the choice of either keeping the home and paying the lender of selling the home and using the proceeds to pay the Reverse Mortgage. All remaining equity is paid to the estate after the Reverse Mortgage is satisfied.
Will the Reverse Mortgage Effect the Homeowner/Borrower's Taxes or Social Security? NO! Equity received from a Reverse Mortgage is a loan and not income and is NOT subject to income tax and will NOT affect social security benefits or Medicare.
American Reverse Mortgage located in Ocala, Florida - toll free (888) 370-6620 will send a free information package tailored to meet specific financial needs with no obligation. Their website has convenient links to other affiliated associations as well as providers of Reverse Mortgages in other states.
American Reverse Mortgage is seeking people nationally for Reverse Mortgage Advisor positions. Call (888)370-6620 for complete details.
Jim Johnstone, Real Estate Attorney in McCaysville, Georgia serving the Blue Ridge area of the North Geogia Mountains is a Reverse Mortgage Advisor and can be contacted at 706-455-1012.
About the Author
Donna Yates utilizes her corporate experience of 30 years combined with her Real Estate experience in order to help customers/clients with investment opportunities, second homes, vacation homes, meeting any real estate need. Donna contributes to several Web Blogs which focuses on the Blue Ridge Mountains, North Georgia Real Estate Market, as well as other topics important to North Georgia. View great mountain properties for sale.