How Does A Reverse Mortgage Work?

This site is designed to answer all of your questions about reverse mortgages. You'll learn how reverse mortgages work, the eligibility requirements, the benefits and dangers of reverse mortgages. You'll also be able to order a FREE informational DVD provided by the Senior Lending Network.

Click here to order your FREE DVD and information package.

Now let's start off with some reverse mortgage basics:

How does a reverse mortgage work?

A reverse mortgage is a type of home loan that does not need to be repaid as long as you live there. In a regular mortgage you borrow money and then your monthly payments reduce your debt over time. As your loan balance rises your home equity increases.

When you reverse the process you use the equity you've built up in your home to borrow money. Since you don't make monthly payments your loan balance actually grows larger as it accrues interest.

Put another way, with a regular mortgage you use debt to convert your income into equity. In a reverse mortgage its the opposite. You use your equity to income.

What is the main benefit of a reverse mortgage?

Reverse mortgages allow you to tap into your home's equity to supplement your retirement income and improve your quality of life. Many senior citizens find that Social Security and pensions are not enough to live on. Between the cost of food, medical care, prescriptions, property taxes, and other basic living expenses, there is often little money left at the end of the month.

Taking out a reverse mortgage can give seniors the extra cash they need to pay off bills, improve their home, travel, or do anything else they want with their retirement.

Who are reverse mortgages designed for?

Reverse mortgages are perfect for older homeowners who are "house rich and cash poor." Perhaps you've built up equity in your home or your mortgage is already paid off, yet you do not have money to cover daily living expenses, medical bills, home repair and other expenses. in this situation a reverse mortgage may be right for you.

What are the eligibility requirements?

To be eligible for a reverse mortgage:

• You and all co-borrowers must be age 62 or older.
• You must own your home outright or have a very loan mortgage balance.
• The home must be your primary residence.

How much money can I get?

Its difficult to give you an exact answer. The amount of cash you can receive from a reverse mortgage depends on several factors including the program you select, your age, current interest rates, your home's value, and the amount of equity you have in it.

How do I get paid?

Reverse mortgages are generally paid out in one of the following ways: a monthly payment, a lump sum payment, a line of credit, or a combination of each.

Options can vary from one lender to the next. Look for one that offers the solution you need. Perhaps the most common choice is to take a lump sum to pay off credit cards and other debt and leaving the rest as a line of credit that can be tapped into if needed in the future.

When do I have to pay back the money?

A reverse mortgage doesn't have to be reapid until you either move out of the house or die. If you sell and move somewhere else, you can use the proceeds from the sale to repay the mortgage. If you pass away, your heirs can repay the mortgage by selling the house or using their own funds.

Can I ever owe more than the house is worth?

No. Reverse mortgages are designed to avoid this. the most you can ever owe is the value of the home itself. So if your reverse mortgage balance is $220,000 but your home sells for only $200,000 the lender must take it as a loss. They can not come after you or your heirs for the remaining $20,000.

Can I lose my home? No, you can not be forced out of your home. With a regular mortgage, your lender can foreclose on your property if you fail to make your monthly payments. But since you don't have to make payments on a reverse mortgage, foreclosure is never a concern. However, you do have to continue to pay your property taxes on time and keep the house from falling into disrepair.

Where can I get more information?

That's easy. Just send away for your FREE Reverse Mortgage DVD and brochure from the Senior Lending Network.