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Senior Citizen's Guide to Indianapolis

What is a Reverse Mortgage?

What is a reverse mortgage?
We see more and more seniors entering into the retirement years with increased debt. Many “Boomers” still have a mortgage, car payments, credit card debt, and medical expenses. In short, many seniors are not as prepared financially as they thought they would be. For many, if they could get rid of their mortgage payment then that would free up enough cash to pay for their prescriptions, debt, travel or simply relieve some of the financial stress.

A reverse mortgage is simply a loan against the home that does not have to be repaid by the senior as long as they live in the home. In addition to no monthly payment, you could get cash in a residual form or lump some to help with expenses, pay off debt, or even travel to see those grandchildren. Since the reverse mortgage works in “reverse” of a traditional forward mortgage the borrower needs to have a certain amount of equity in the property.

The cash you get from a reverse mortgage can be paid to you as:

How does one qualify?
All borrowers must be 62 years of age; the property must be their primary residence which they occupy six months out of the year; investment properties or second homes do not qualify. There are no income or credit requirements, unless it affects title like a liens, tax liens, judgments, or things that may become judgments. Death of one borrower does not force repayment of loan, the surviving borrower can remain in home till death or they decide to sell the home. The deed and title remains in the borrower’s name as well.

There are some property eligibility guidelines such as single family, condo, 2-4 units; so you must check with a lender to be sure your property is eligible. Your home must also meet HUD’s minimum property standards, but you can use the loan to pay for repairs that may be required. You must also keep the home is good shape, as well as making sure all property taxes stay current.

Misunderstandings
Often times it’s the family members who have concerns. These range from wanting to protect parents from any risk, or predatory lenders; to desiring to protect the estate when the parents pass. This is one of the reason HUD requires counseling by a nonprofit or public agency approved by HUD (the U.S. Department of Housing and Urban Development). The main goal is to make sure you and your loved one, should you choose to involve them fully understand the pros and cons to such a product. For current information on requesting HECM counseling, go to www.hecmresources.org/network.cfm or call 1-800-209-8085. Counselors typically charge a fee, however this can be paid through the loan too.

One misunderstanding is who owns the home? As stated earlier, you maintain ownership of your home. You remain on deed and title, and you remain in the home. Even in the event of your death, family has a year to determine future ownership of the home.
Most family members are in favor of parents improving the quality of life. In fact, a recent poll indicated that 78% of family members were in favor of the reverse mortgage product, once they fully understood how it works.

There are many great features with this product, however speak to a professional in your area if you have a specific questions or want to learn if you qualify.

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