Reverse mortgage

A reverse mortgage (known as equity withdrawal in the United Kingdom) is a type of loan used by older consumers as a way of converting their home equity (the value of their home, minus the amount of mortgage(s)) into a cash payment (or series of payments) while retaining ownership of their property. To qualify for a reverse mortgage in the United States, you must be at least 62 and have paid off all or most of your home mortgage.

Reverse mortgages allow the home owner to continue living in the home without being required to repay the loan. In exchange, the lender receives a substantial fraction of the home's equity. In the United States, the proceeds of the loan are tax-free, there are no minimum income requirements, and for most reverse mortgages, the money can be used for any purpose. However, reverse mortgages also tend to be costlier than other types of loans, and are sometimes abused by disreputable lenders.

Income is generally not considered by lenders when granting reverse mortgages, and no medical tests or medical histories are required. The amount you can borrow depends on your age, the equity in your home, the value of your home, and the interest rate. Reverse mortgages administered by the government may have other requirements as well.

In the United States, you can be paid in a lump sum, in monthly advances (payments), through a line of credit, or a combination of all three. The loan advances, which are not taxable, generally do not affect Social Security or Medicare benefits, since they are an asset exchange (giving up part of your home equity in exchange for cash), not income. However, you should keep in mind that reverse mortgages tend to be more costly than traditional loans. They also use up all or some of the equity in a home. For these reasons, it's very important to compare reverse mortgage lenders and be aware of their requirements and risks before applying for this type of loan.

Here are the guidelines for FHA approved Reverse Mortgages as of May 2005 according to HUD and FHA (http://www.hud.gov/offices/hsg/sfh/hecm/hecmabou.cfm)

HUD/FHA - HECM (Home Equity Conversion Mortgage) This plan provides cash, a line of credit* or monthly income (or any combination) for a fixed term or as long as you live in your home.

Features and Benefits:

• Maximum Lending Limit varies from $172,632 to $312,895 depending on the geographic area (adjusts annually)
• Government Insured Program
• Available to homeowners 62 or older
• Variable T-Bill interest rate plus margin is adjusted monthly or annually
• Funds are available as cash payment, line of credit, or monthly income for a fixed term or as long as the borrower lives in the home
• Available balance on line of credit grows annually
• Rising debt loan; may not preserve equity
• Loan origination and closing costs may be financed by the loan
• A monthly servicing fee is added to the loan balance
• Counseling by an approved Fannie Mae or HUD counselor is required
• Social Security or Medicare eligibility may not be affected, and generally neither are SSI or Medicaid/MediCal (Consult The Social Security Administration and your tax advisor)
• No income qualifications
• Use of loan proceeds not restricted except in Texas
• Loan proceeds are tax-free

HomeKeeper by Fannie Mae This plan provides cash, a line of credit* or monthly income (or any combination) for as long as you live in your home.

Features and Benefits:

• Maximum Lending Limit: $359,650 (adjusts annually)
• Government Sponsored Enterprise Program
• Available to homeowners 62 or older
• Variable CD interest rate plus margin is adjusted monthly
• Funds are available as cash payment, line of credit, or monthly * income for as the borrower lives in the home
• Rising debt loan; may not preserve equity
• Loan origination and closing costs may be financed by the loan
• A monthly service fee is added to the loan balance
• Counseling by an approved Fannie Mae or HUD counselor is required
• Social Security or Medicare eligibility may not be affected, and generally neither are SSI or Medicaid/MediCal (Consult The * Social Security Administration and your tax advisor)
• No income qualifications
• Use of loan proceeds not restricted except in Texas
• Loan proceeds are tax-free

External links

The Department of Housing and Urban Development or HUD and The National Reverse Mortgage Lenders Association or NRMLA have the following publications free for the public to download:

• Home Made Money by: HUD (http://www.mortgage-loan-solutions.com/homemademoney.pdf)
• Consumers Guide to Reverse Mortgages by: NRMLA (http://www.mortgage-loan-solutions.com/Consumers_Guide_to_Reverse_Mortgages.pdf)
• Using Reverse Mortgages for Health Care by: NRMLA (http://www.mortgage-loan-solutions.com/Using_Reverse_Mortgages_for_Health_Care.pdf)
• Answers to Common Questions About Reverse Mortgages by: NRMLA (http://www.mortgage-loan-solutions.com/Answers_to_Common_Questions_About_Reverse_Mortgages.pdf)
• Guide to Aging in Place by: NRMLA (http://www.mortgage-loan-solutions.com/Guide_to_Aging_in_Place.pdf)
• Reverse Mortgage Fact Sheet (http://www.fact-sheets.com/loans/reverse_mortgages/)
• Personal Finances - Home Equity Loans (http://www.e-personalfinances.com/search.php?q=home+equity+loans)ja:リバースモーゲッジ