February 1, 2013
Gina M. Barry, Esq.
A multitude of seniors, having paid off their mortgages many years ago, currently own their homes free and clear of any debt. Some are fortunate, and they have a nest egg that, along with their income (Social Security / pension), allows them to maintain their home and provide for themselves without difficulty. Some are not so fortunate, and although they own their home, they do not have adequate sources of income and other assets to maintain the home as well as provide for their care needs.
When a senior find himself or herself unable to afford his or her home, but has some overwhelming reason to remain there, instead of selling or downsizing, a reverse mortgage, also known as a home equity conversion mortgage (HECM), can provide access to the equity in the home without the traditional monthly payments associated with a mortgage. In order to qualify for a reverse mortgage, the borrower must be at least 62 years old and own their home. The home must be the borrower’s primary residence, and not a rental or vacation property. If the borrower has an existing mortgage on the property, he or she must pay off the existing loan with money received from the reverse mortgage. There are no income requirements. Further, if they are participating in the federal HECM program, the borrower must undergo consumer counseling before being approved for the reverse mortgage.
Similar to a traditional loan, the property would be appraised and inspected as part of the approval process. Generally, a borrower can expect to be able to access between 50% and 70% of the appraised value of the home, but...
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by: Gina M. Barry