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Now browsing: Hometown News > Business Columns > Daniel Poulos

Daniel Poulos
This Week | Archive

Don't rush into a reverse mortgage
Rating: 3.02 / 5 (204 votes)  
Posted: 2006 Oct 27 - 02:53

Reverse mortgages are one of the most misunderstood mortgage products on the market but their popularity is growing.

With living expenses such astaxes, insurance and gasoline on the rise, seniors are finding relief by tapping into the equity in their homes without adding the obligation of a monthly mortgage payment.

But, before you shift your mortgage into reverse, you had better check your mirrors.

If you are considering a reverse mortgage, make sure you get the whole story and compare your options to a traditional cash-out mortgage.

First, let's examine the benefits.

Contrary to what you may have heard, here are four things that can NEVER happen if you have a reverse mortgage:

You NEVER make a mortgage payment.

You NEVER give up title to the home.

You will NEVER be forced to sell.

You will NEVER owe more than the home's value.

The reverse mortgage is a simple concept. First, you must be at least 62, and second, you must have sufficient equity in your home. The lender enables the homeowner to borrow the equity in their home without ever having to make a mortgage payment for as long as they live in the home. The funds are available in a lump sum, as monthly payments to the borrower, as a line of credit or any combination of options.

The loan may be paid off anytime, but must be satisfied when the borrower no longer occupies the home as a primary residence.

Here are some examples of how a reverse mortgage might be the perfect loan for many seniors.

With traditional mortgages, no matter how much equity there is in your property, you may still have a problem qualifying for a mortgage to access your equity when you most need to. There are absolutely no income or credit requirements for a reverse mortgage, because the lender is not relying on you to make any payments.

Homeowners in need of long-term health care can afford to stay in their home. Recent reports by the National Council on the Aging and the Centers for Medicare and Medicaid Services have cited the benefits of reverse mortgage programs.

One report is titled, "Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages to Pay for Long-Term Care."

Now, the flipside.

Reverse mortgages are expensive. Closing costs can be considerably higher than with traditional mortgages and mortgage insurance is required in all cases.

Because the costs come out of the equity in your home and not your checkbook, you may not fully appreciate just how much you're spending. If you can qualify for a traditional mortgage, you will have access to many more products and still be able to tap into your home equity while keeping your payment affordable.

If you are currently in a reverse mortgage, you should know that you may benefit by refinancing into a traditional mortgage. One thing is for sure. Only by conferring with an experienced mortgage professional, with access to all mortgage products, can you responsibly determine which program is just right for you. Remember . prescription without prognosis is malpractice.

Daniel J. Poulos is the president of Elite Lending, at 1232 W. Indiantown Road, Jupiter in the Shoppes of Jupiter Creek. For additional information and assistance with any home or commercial financing, call (561) 745-5575 or in Port St. Lucie, (772) 335-5556 at 1814 SE Port St. Lucie Blvd., Port St. Lucie.

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