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What is a Reverse Mortgage?

Sometimes referred to as a home equity conversion mortgage, reverse mortgage loans allow senior homeowners who are at least 62 or older to use the equity in their home to receive payments from a lender or bank. The key benefits that differentates a reverse mortgage between a traditional mortgage is that no income is necessary to qualify and homeowners are the ones receiving monthly payments instead of homeowners making monthly payments on traditional home loans.

The reverse mortgage is not due until the homeowner decides to move out of the home, sells the home or is no longer living. Keep in mind that property taxes and homeowners insurance are still required to be kept current. A handful of seniors ended up having their homes foreclosed because they took out all the cash available from the mortgage and do not allocate enough to pay the property taxes.

As a result, government guidelines are in the process of changed to require banks to withhold some of the reverse mortgage proceeds to set aside to pay for the property taxes and home insurance, similiar to an escrow account.

Ever since reverse mortgages began gaining notoriety in home finance circa thirty years ago, Wells Fargo has been a major lender, accumulating as much as 20% of the overall market. However, as of 2011, Wells Fargo has suspended all reverse mortgage business, and is no longer accepting new applicants.

Reverse Mortgage Spotlight

Popular Uses for Reverse Mortgage

1. Pay for Medical Bills
2. Pay for Credit Card Bills
3. Daily Expenses
4. Provide Family Members Financial Assistance
5. Travel
6. Pay Property Taxes/Insurance
7. Home Improvement
8. Pay Off Existing Mortgage
9. Emergency Savings
10. Cash Out Equity

External Resources

HUD Reverse Mortgage FAQ