How a Reverse Mortgage Works

If you are over 62, you should take a minute to learn about this.First and foremost, I want to dispel a common misconception about Reverse Mortgages. Some people still think that when you obtain a Reverse Mortgage you "sign over" your house to the bank. This is FALSE! A Reverse Mortgage merely places a MORTGAGE on your home. It is no different in that respect than any other mortgage product you are familiar with.Even if you already have a first mortgage on your house, you may still be eligible for a Reverse Mortgage.A percentage of the value of your house is subject to availability of acceptable equity in your home. The most common type of Reverse Mortgage is the "Home Equity Conversion Mortgage". Otherwise called the "HECM". The HECM is GUARANTIED by FHA. That guaranty assures both YOU and the bank of some critical things.First and foremost, that guaranty assures the homeowner that they will NEVER owe more on their home that it is worth. Whether that home goes down in value or not! At no time will you ever have to worry about selling your home in a "short sale" situation. No worry about passing your home to your heirs with a balance owed in excess of its value.Second, the FHA guaranty assures you that if you chose to receive monthly payments under the conditions of the loan, you will receive them whether the bank that arranged that loan stays in business or not. FHA obtains documents at the closing that enables them to "pick up" the responsibility of that loan without any delay.Some of the payment options of the HECM are:- A line of credit (only earns interest if it is used)- A lump sum payment (up to 100% of the allowable equity is disburseddirectly to you in one payment)- "Tenure" payment (Payments will be received by you until you sell, or moveaway from your home)- "Term" payments (Payments are made to you for a specified length of time)- A "Modified Tenure" or "Modified Term" is one that combines either lumpsum, line of credit and Tenure or Term payments.I have been lending money since 1975, and I feel that this loan program is the most well regulated and conservatively designed of any that I have known. Seniors that may want to consider this product should be assured that this product does not jeopardize their ownership of their home.