Home Buying Tips

I'M 62 IS A REVERSE MORTGAGE FOR ME?
A reverse mortgage is a financing device offered to persons over 62 years of age which is secured by a mortgage on a borrower's principal residence.


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Biddeford, ME - 04005
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I'M 62 IS A REVERSE MORTGAGE FOR ME?

A reverse mortgage is a financing device offered to persons over 62 years of age which is secured by a mortgage on a borrower's principal residence. The difference between a regular mortgage and a reverse mortgage is that under the terms of the regular mortgage, the bank lends a sum of money and the borrower makes monthly payments for a period of time. Under the terms of a reverse mortgage, money is lent to the borrower but no payments are required. Interest on the sums lent accrue at either a fixed or variable rate, depending on the program selected and all sums become due upon the happening of a specified event. Roughly stated, these events are the death of the owner or owners of the property, the sale of the property or when the property is no longer used as the principal residence of the borrower or borrowers.

A borrower under a reverse mortgage transaction has several choices. Money can be used to pay off an existing mortgage and thereby eliminate any current, monthly payments. The borrower is then relieved of a monthly obligation and money ordinarily spent on mortgage payments can be used for other purposes or just saved.

A borrower can set up a line of credit to be used, when needed, for repairs, taxes or other non-recurring expenses. Interest only accrues from the date of advancements. Depending on the program, the line of credit available can increase from year to year depending on pre-determined increases in the value of the home.

It is also possible to set up a monthly draw from funds available under the reserve mortgage. This can be done over a fixed period of years or over the lifetime of the youngest borrower.

The amount available to a reverse mortgage borrower is dependent on a number of factors. The lending limit in the area of the home, the age of the youngest borrower, the appraised value of the home and the anticipated interest rate during the term of the loan are all factors which determine the loan amount.

Like any financing program, there are times when it is appropriate and times when it is not. The upfront fees are considerable and the value of the reverse mortgage will be reduced if the borrowers' health is such that continued use of the property will be of short duration. There is a mandatory counseling requirement and this serves to assist a borrower in making a decision.

There are a number of highly regulated lenders who offer reverse mortgages. This office would be happy to assist in making recommendations to any persons interested in obtaining a reverse mortgage.