Reverse Mortgage to supplement income: |
A Reverse Mortgage is a financial product available to senior homeowners that can be used to supplement retirement income. Unfortunately Reverse Mortgages are complex financial products that are frequently misunderstood and therefore under utilized. Consumers unfamiliar with any terms in this material should consult a Reverse Mortgage Glossary for a definition. AARP has extensive information on what to consider when Exploring Reverse Mortgages and a 72-page pamphlet titled "Home made money". Borrowers should consider using federally insured loans to help avoid Reverse Mortgage fraud.
Avoid loans where the loan balance becomes due and payable for term loans!
How much you get is calculated using a formula that takes into account:
However, there are 203-b loan limits for the maximum amount of a Reverse Mortgage which range from as little as $100K to more than $250K depending on the product and geographic region. Online Reverse Mortgage calculators are available at AARP and Reverseweb.com for loan estimates.
The borrower can receive payment in the following forms:
The two most popular Reverse Mortgages are the Home Equity Conversion Mortgage from HUD and the Home Keeper loan from Fannie Mae and are available in most states. Both products are federally insured which protects the consumer should the lender default.
As with other loans, consumers should shop around for the terms and conditions which best meet their needs as there can be substantial differences between loan amounts offered by various lenders. The best way to compare the cost of competing loans is to use the Total Annual Loan Cost (TALC) required by the federal Truth-in-Lending law (Reg.Z) that serves as the fundamental disclosure for alerting borrowers to the total cost of a reverse mortgage.
"Reverse Mortgages for Beginners" by Ken Scholen
National Center for Home Equity Conversion (NCHEC)