Forward in Reverse

The Reverse Mortgage has shifted into a new gear. The loan program that allows people to tap their home’s equity for income can now be used to either buy or refinance a home.

The Reverse Mortgage is backed by FHA, and was created for people over 62 years old to refinance the equity in their home, eliminate monthly payments, and use the money as a cash advance or monthly income, with the guarantee that they will never owe more than their house is worth.

The program now also allows for people over 62 to buy a home and finance the debt as a Reverse Mortgage so they have no monthly payments, and receive money instead.

“The Reverse Mortgage completely changed my life,” says Carol Hennison. “After my husband passed, I couldn’t keep our home. The payments and upkeep were too much. ”

 Carol sold her home and with the proceeds made a down payment on her newer, smaller place. She financed the purchase with a Reverse Mortgage, which allows her the choice of taking cash advances or receiving monthly payments. Carol chose to receive the monthly payments.

“I have no loan payment and I receive monthly income,” she said. “I can’t believe it!”

The catch is that Carol’s loan balance grows over time, as she receives payments, and the loan balance could eventually exceed the value of Carol’s home. If that were to occur, though, the lender can never pursue her or her heirs for anything. The Reverse Mortgage program is designed to keep people like Carol in their homes and the payments she receives will continue until she moves or dies. If there aren’t enough proceeds from the sale of the house to pay off the loan, the lender takes the loss.

John Baxton was behind on taxes and insurance for his house, and late on his mortgage payments. “The last thing I wanted to do was sell my house, but it looked inevitable,” he says. “Then my son heard about this program and I was saved.” Baxton refinanced into a Reverse Mortgage which ended his house payments and gave him monthly income, as well as cash to bring his taxes and insurance current.

“Now I can stay here and live very comfortably.” he said. “It’s quite a reversal!”

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Doug Love is Sales Manager at Century 21 Jeffries Lydon. Email escrowgo@aol.com or call 530-680-0817.