Mortgage that Pays You: 5 Advantages of a Reverse Mortgage

The Federal Housing Administration created the Home Equity Conversion Mortgage (HECM), the leading type of reverse mortgage. Read about the top five advantages of a reverse mortgage, and you will want to learn more.

1. Unlike a home equity loan, you make no payments as long as the home remains your principal residence.

2. Your current income and credit rating has no bearing on your approval for a reverse mortgage.

4. Even if your loan balance exceeds your property's value, you do not have to make up the difference.

5. After you sell your home and repay your reverse mortgage, any remaining home equity belongs to you or your heirs.

To qualify for an FHA HECM, you must:

• Be at least 62 years of age.
• Live in a one- to four-unit home.
• Either own the home outright or owe only a small amount that you can pay off from the reverse mortgage proceeds.
• Receive consumer information from an approved counselor before closing the loan.
• Continue to pay the usual home owner's expenses on time, such as home insurance, property taxes, and utilities.

You have several options for receiving payment.

• Tenure: Equal monthly payments as long as at least one borrower continues to occupy the property as a principal residence.
• Term: Equal monthly payments for a selected fixed period.
• Line of Credit: You choose the times and amounts of payments or installments, which continue until you exhaust the line of credit.
• A combination of these options.

Reverse mortgage aren't for everyone--those who qualify for a home equity loan will probably pay less for their financing. however, reverse mortgages can be lifesavers for cash-strapped seniors, allowing them to enhance their lifestyles and live more securely.

Dean Schermerhorn
Dean Schermerhorn, MA, owner of Concise Communications, lives in Reno, Nevada. He has written for banking, health-care and manufacturing businesses and articles on finance and business topics.