Reverse Second Mortgage

If you’re sixty-two years of age or older and you own your home outright (or only have a small amount still due) then you may qualify for a HUD-backed reverse equity mortgage.
With a reverse equity mortgage, since you never make any payments, you make no mortgage payments for as long as you live and you can never be foreclosed on because of a missed payment.

A HUD-approved reverse mortgage is perfect for seniors who have a lot of equity in a piece of property and who need money to live on, or who need extra cash for medical expenses or for other reasons.

In order to understand how a reverse equity mortgage works you must clear your mind of everything you know about mortgages – because a reverse mortgage is pretty much the opposite of everything you thought you knew about mortgages.

When you apply for a traditional second mortgage you generally must be able to show some means of repaying the loan. That is not the case with a reverse equity loan. You need NO income of any kind since you never make a payment. A reverse equity loan pays you instead of you paying for the loan.

How much you can borrow depends on your age, the amount of equity in your home, the current interest rate, the neighborhood in which you live and other factors, including loan fees. All things being equal, the older you are and the more equity there is in your property the more you can borrow.

Once your loan is set up you can have the cash paid to you in several different ways. You can take your equity in a lump sum, or you can have payments made to you every month for as long as you live, or you can have payments made to you every month for a certain number of months that you choose, or you can have an equity line of credit that you can drawn on as you see fit, or several other options.

The amazing thing about a reverse mortgage is that you never have to pay back the loan during your lifetime as long as you or one of the borrowers continues to live in the home, pay the property taxes, make the insurance payments and keep the home well-maintained.

The loan is only paid when the last of the borrowers die or moves out of the home. The loan may be paid by refinancing the home if the heirs wish to keep the home, or through the same of the home.

If the borrower outlives the length of the loan – that is, outlives the equity in the home – the homeowner continues to live on the property and no payment is due on the loan until the last borrower dies or moves. There is no worry to the heirs because the loan is only secured by the home itself and there can never be any charge made against the heirs, no matter how long the borrower lives.