What is a reverse mortgage? The question seems to go against all modern thoughts. I have paid many, many years to a lender to own my home so that I could call it my own. Now they create a product that reverses that process? Huh?
As a result of the Housing and Economic Recovery Act of 2008, the Home Equity Conversion Mortgage for Purchase (H4P) was created to provide an option for senior citizens who suddenly found themselves strapped for cash to live on due to the recession or due to an emergency.
The H4P program, an FHA insured program, allows seniors, age 62+, to use equity in their existing home to supplement their income, pay emergency expenses, or purchase a new/different home.
How it Works
There are several options available to eligible seniors,
- You can use the equity in your home to establish a line of credit that can be used for future expenses, or
- You can use the equity in your home to establish a regular monthly income source, or
- You can use the equity in your home to purchase a new home that better fits your current health and living style.
The third option above is the one that is most intriguing. You can use the equity in your home to purchase a new/different home that has twice the value and never pay another mortgage payment as long as you live. What? This can’t be true. Let’s say you have you have $100,000 equity in your home after it is sold. The H4P program will allow you to use that equity to purchase a $200,000 home (new or used) and you no longer have a mortgage payment. The monthly mortgage payment you would normally pay actually accrues monthly into a loan over time. When a life event happens, your heirs will be able to sell the property, payoff the note and realize the remaining equity you have in the property.
Still sound like a shady deal? Visit the Reverse Mortgage Information website. On this site you will find examples, a learning center, useful tools and other information that will provide you with the knowledge needed to better understand how this program can work for eligible individuals. Another online resource is Retirement Funding Solutions. Visit this site where you find FAQs, an HECM Calculator, Request a Quote and contact information to reach an expert.