Reverse Mortgages




The first thing to know about reverse mortgages is that they’re time-tested and extremely safe products. The law creating Home Equity Conversion Mortgages was signed in 1988 by President Reagan, they are meticulously regulated, FHA-insured, and every precaution is utilized by both the government and the lending institution to ensure the borrower understands the product fully. Since there are no established credit or income qualifications, virtually anyone with substantial home equity can utilize a reverse mortgage. (Obviously lenders prefer lending against homes that are owned free-and-clear or have low LTV ratios; for a Home Equity Conversion to work, there has to be equity in the home to convert!)

The principle purpose of the reverse mortgage is to provide older individuals with a low-risk source of extra income as a one-time lump sum, regular monthly payments, or some combination of the two. Therefore, anyone taking out a reverse mortgage must be 62 years old or older. And since the product is neither designed nor intended to be used as creative financial instrument, certain rules exist that limit how the product can be used: Reverse mortgages can only be taken out on primary residences (that is, they cannot be taken out against investment properties), though they can be used with 1-4 unit properties as long as the borrower occupies one of the units; the property must be fee-simple (no co-ops); or, if it’s lease-held, it must have at least a 99-year lease.

A common question regarding reverse mortgages is what happens to the home during and after the term of the loan. Few people, especially those in precarious financial situations, like the idea of a bank having a lien against their property. So it’s important to stress that with a reverse mortgage the bank cannot repossess the home; the borrower retains ownership until their passing. Further, unused equity is bequeathable. (Is that a word? Or should I add it to the list of words I’ve coined, like ‘meticulate’?) That is, the borrower’s children can inherit unused equity. They also have the option to pay the mortgage and retain ownership of the home. Finally, if the value of the home falls below the amount of equity withdrawn, neither the borrower nor their family is responsible for the deficit. As an FHA-insured product, the difference is covered by the government and settled between the FHA and the lender.

GARVENS GROUP OF CHURCHILL MORTGAGE PROVIDING COLORADO SPRINGS WITH HOME MORTGAGES, VA LOANS, CONVENTIONAL LOANS, AND FHA LOANS
Company NMLS ID # 1591 (www.nmlsconsumeraccess.org); CO–Mortgage Company Registration, Churchill Mortgage Corporation, 104 S Cascade Ave. Ste. 201A, Colorado Springs CO 80903-5102, Tel 888-562-6200, Regulated by the Division of Real Estate
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