Reverse Mortgages

You must be 62 years old in order to be eligible for a reverse mortgage. The loans allow borrowers house the home equity to get tax free. After the borrowers die or move, the lenders are repaid when the house is sold. The lenders can charge fees equal to as much as 6 percent of a home's value. Homeowners who have sufficient equity in their homes can qualify for loans up to $362,790.00 that are backed by the Federal Housing Administration. Pending legislation of a housing bill in Congress includes a proposal to raise payout to $550,000.00 and eliminate the current limit of $275,000.00 Reverse mortgages that the Department of Housing and Urban Development can insure. This should be beneficial to more senior homeowners to consider reverse mortgages.

Senior homeowners who have adequate cash flow should consider other forms of financing the asset of their home, such as a home equity line of credit. Reverse mortgages do not have income requirements or minimum credit scores since the interest is added to the balance and the loan is not repaid until the home is sold. The interest rate for the loan is tied to the monthly London Interbank offered rate, plus a margin and started at 4 percent as of June, 5th, 2008. The rate can go as high as 13.5 percent during the life of the loan, if interest rates escalate. The loans are considered best fro homeowners over the age of 75 who plan on being in their homes for a period of 5 years. Borrowers younger than the age of 75 may outlive the equity in their homes and the fees and costs associated with the loan make an early move prohibitive.

Borrowers are able to take the money in a in a lump sum payment, a line of credit, or periodic checks. Proceeds remaining after the loan is paid are passed on to the heirs. According to the American Association of Retired Person's Public Policy Institute, borrowers were occasionally offered investment products such as annuities and long term care insurance. It is a conflict of interest to sell Reverse Mortgages with these types of investments.

Additional Information for Low Income Borrowers: A first time home buyer and low-to-moderate income persons and families should check with the state they live in to see if there is a housing financial agency available and the qualifications required to apply for a mortgage.

Some mortgage lenders are able to assist low-income borrowers or those with poor credit. Some programs allow a low down payment and may be approved with less documentation than a traditional loan. Many of these loans carry a higher interest rate than traditional bank loans.

In today's world of mortgage financing, it is worthwhile to shop around and continue to learn about the best home mortgage financing available that fits your needs.