What is Reverse Mortgage?

A reverse mortgage is a type of home loan that lets you convert a portion of the equity in your house into cash.
With regular mortgages, borrowers make monthly payments to pay down the debt. With reverse mortgages, lenders pay borrowers and the debt increases over time. The loan isn’t settled until the borrower sells their home, moves out or dies.
The loan is then repaid or the home is sold to pay off the debt.
Owners must pay the property taxes and insurance costs and keep the house in good condition when they agree to a reverse mortgage. If they don’t – and many have fallen into that trap – the lender can foreclose.
Most reverse mortgages are insured by the Federal Housing Administration under a program known as the Home Equity Conversion Mortgage, or HECM.
The first reverse mortgage was written 1961 when Deering Savings & Loan in Portland, Maine, designed one to help a widow stay in her home after her husband’s death.
The program really took off in 1988 when Congress passed a bill giving the FHA authority to insure the loans. Activity peaked in 2008 with 115,000 loans, and then the Great Recession cut that annual number almost in half.

The past few years have seen a turnaround. Reverse mortgages still only account for 1% of the $11.5 trillion in U.S. mortgages. But the number of eligible applicants – people over 62 – is expected to go from 46 million now to 98 million in 2060, according to 2017 statistics from the Department of Health and Human Services.

What is Reverse Mortgage? from Robert Jackme on Vimeo.
Location: United States

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