Monday, October 12, 2009

What is a Reverse Mortgage?


By Karen Saley, Extension Specialist

A reverse mortgage is a loan secured by your home that lets you receive payments from the lender. As you receive payments, these amounts are added to your loan balance. Generally to obtain a reverse mortgage, you must be a homeowner at least 62 years old.

With health care costs rising and people living longer lives, many older folks are considering reverse mortgages to help them with their financial needs. These types of mortgages may be beneficial to some, but there are some pretty important issues to consider before making the leap.

Interest and fees
Just like any other type of loan, interest and fees are charges with a reverse mortgage. Even when you are no longer receiving payments, interest is charges on any outstanding balance until the loan is paid off.

Taxes and insurance
With a reverse mortgage even though you are no longer making payments on your home loan, you are still responsible for the property taxes and insurance on your home.

With reverse mortgages you generally do not pay back the loan, but keep in mind that when you pass away your heirs will be responsible for the repayment of the loan in order to claim the property. This also applies if you should move out of the home or sell it.

If you find yourself in need of some extra cash you may want to explore other options before taking a reverse mortgage. Selling the home and downsizing or possibly drawing from a retirement fund may be better options depending on your circumstances. Talk to a financial advisor or housing counselor before making the decision.

For more information contact these agencies.

U.S. Department of Housing and Urban Development
AARP Foundation, Reverse Mortgage Education Project
National Association of Reverse Mortgage Lenders


Email Subscription

Enter your email address:

Delivered by FeedBurner



Company and product listings do not represent endorsement by either: Pinellas County Extension, Pinellas County or the University of Florida / Institute of Food and Agricultural Sciences.