by Frank Miller

Created on: August 13, 2009

Is a Reverse Mortgage the Right Choice for You?

While Reverse Mortgages may not be for everyone, they can be an excellent choice for many. Are they the right choice for you? Let's explore them in more detail.

What is a Reverse Mortgage?

A Reverse Mortgage is a special, Government sponsored program designed specifically for homeowners over the age of 62. Unlike a traditional mortgage, there are no monthly payments to make. There are also no credit, asset or means requirements to qualify for the mortgage. This can be an important factor for seniors with less than sterling credit or for those living on reduced retirement incomes.

Various programs are available with different rates and benefits. There are fixed and variable rate programs, each having different features. While most are still Government Programs, proprietary programs with individual banks have also been available from time to time. While you should always use the broker or bank that you feel most comfortable with, be sure they can offer you the most competitive programs.

Under a traditional mortgage the monthly payments pay for the interest, and usually pay off principal on the loan, thereby reducing the amount of the mortgage. With the Reverse Mortgage the amount of cash you receive, together with the interest and other charges, are added to and increase the loan balance. This balance however, never has to be re-paid until you move out of your home. You do have to keep your taxes and insurance current and maintain the home, just as you already do.

A Reverse Mortgage is a non-recourse loan. This means that no assets other than your home can be attached to pay off the mortgage. If, when the mortgage comes due, the mortgage amount is greater than the value of the home, the homeowner or estate will only be responsible for fair value of the home unless the home is taken over by a family member, in which case the entire mortgage amount may be due. In other words, a sale must be at "arms-length" or the full loan value may be due.

Should the value of the mortgage be less than that of your home, either you or your estate receive the remaining equity in the home when you leave or pass away. Taken together, these features offer what could be considered a "Win-Win" situation.

Your mortgage balance becomes due when you sell the home, when you vacate it for more than 12 months, or when the last surviving borrower passes away. On sale, it is satisfied at closing, as would be any other mortgage. Your

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