Reverse Mortgages Booming
November 29, 2007
Believe it or not, there is a segment of the housing market that is doing well. That is the reverse mortgage market. For older homeowners, reverse mortgage programs can add income by using some of their home equity, but these programs are not without some confusion.
In the past, those interested in reverse mortgages only had limited choices, and those were mostly government run plans. Generally, homeowners who had reached the age of sixty-two or older were allowed to sell a portion of the home equity that had to a bank and receive in return either a lump sum or monthly payments.
Today, there are many more choices with about a dozen big banks and other lenders promoting their own reverse mortgage plans. Most of these advertise lower fees and higher payouts. Some have reduced the required age down to sixty. Still others are allowing reverse mortgages on vacation homes, second homes, and the like.
The interesting thing about reverse mortgages is that rather than the borrower making payments to the lender, the lender makes payments to the borrower.
In addition, the borrower maintains occupancy of the house and is not required to repay the money as long as he or she lives there. When the homeowner dies or in some cases moves away, the reverse mortgage loan is paid off by selling the house, and any money left over goes to the homeowner or the homeowner’s estate.