yABC News ran an informative story on reverse mortgages last month. A reverse mortgage is a loan against your home that you do not have to pay back for as long as you live in your home. According to National Reverse Mortgage Lenders Association (NRMLA), the number of reverse mortgages insured by the U.S. Department of Housing and Urban Development (representing 90 percent of all such loans) has gone from 157 in 1990 to more than 107,558 in 2007, with a forecast of more than 200,000 this year.
Some basic facts:
- To qualify for a reverse mortgage, you must own your home and be at least 62 years old.
- Your home must be your primary residence
- You must have paid off your entire loan or have significant equity built up that your mortgage balance can be paid off with a small portion of the reverse mortgage
- Your home must be in structurally good condition and free of major problems such as termite damage or roof leaks
ABC discussed a couple of benefits:
- It is a way to get ready cash.
- The lender cannot remove homeowners from their homes as long as they stay current with their property taxes, insurance and home maintenance.
They also mentioned some drawbacks:
- You will pay closing costs on a reverse mortgage
- A reverse mortgage may affect your eligibility for state and federal government assistance programs, such as Medicaid.
- As you get paid for your house your equity decreases, so you are able to leave less for your heirs.