Reverse mortgages in the United States

It is a loan available to seniors aged 62 or older, under a Federal program administered by HUD (Housing and Urban Development). It enables eligible homeowners to access a portion of their equity. The homeowners can draw the mortgage principal in a lump sum, by receiving monthly payments over a specified term or over their (joint) lifetimes, as a revolving line of credit, or some combination thereof. The homeowners' obligation to repay the loan is deferred until owner (or survivor of two) dies, the home is sold, they cease to live in the property, or they breach the provisions of the mortgage (such as failure to maintain the property in good repair, pay property taxes, and keep the property insured against fire etc). The owner can be out of the home for up to 364 consecutive days (i.e., into aged care) 1. Types of Reverse Mortgages There are three types of reverse mortgages:

single-purpose reverse mortgages, offered by some state and local government agencies and non-profit organizations federally-insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs) and backed by the U. S. Department of Housing and Urban Development (HUD) proprietary reverse mortgages, private loans that are backed by the companies that develop them2

Eligibility: There are three basic requirements to qualify for a reverse mortgage: 1. The youngest homeowner must be 62 years of age or older, 2. The home must be your primary residence, and 3. The type of home and condition of the property must meet standard HUD guidelines3. There are no minimum income or credit requirements because no payments are required on the mortgage. The proceeds from the loan may be used at the discretion of the borrower and are not subject to income tax payment. While credit is not part of the qualification process a current or pending bankruptcy will require court approval prior to closing. Reverse mortgages follow FHA standards for property types, meaning most 1-4 family dwellings, FHA approved condominiums and PUD's will qualify. Manufactured housing qualify based on standard FHA guidelines.4

1. http://comparereversemortgages.com.au/ 2. http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea13.shtm 3. http://www.firstreversemortgageusa.com/reverse.html 4. http://en.wikipedia.org/wiki/Reverse_mortgage

Amount You Can Receive We loan you between 55%-75% of the appraised value of your home. The older you are, the more you get. Listed below is an approximation of the % of the value you would receive in cash (in the form of a loan) based on your age. Age - % 65 - 57% 75 - 63% Age - % 70 - 60% 80 - 66%

If you already have a mortgage on your home: Subtract the amount of your existing mortgage to determine the net cash you would receive. Also remember that going forward, you won't have a mortgage payment each month because your existing mortgage is paid off in the process of getting a reverse mortgage.5 How do I receive my payments? 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 instalments, at times and in amounts you are choosing until the line of credit is exhausted. Modified Tenure - combination of line of credit with monthly payments for as long as you remain in the home. Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.6

Pros & Cons of a Reverse Mortgage Advantages of a Reverse Mortgage

Access to the equity tied up in your home without having to sell your house and downsize

No repayments must be made whilst you are still residing in the house Flexible terms No Negative Equity Guarantees (NNEG) means youll never owe more than the property is worth.

Disadvantages of a Reverse Mortgage

Often come with high set up fees (in the range of $5,000-$10,000) Compounding interest means you could quickly owe more than you expected leaving less money for your estate/your childrens inheritance Higher rate of interest than a typical home loan.7

5. http://www.rmeducator.com/programs.php 6. http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten 7. http://comparereversemortgages.com.au/