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What is a Reverse Mortgage?

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A reverse mortgage is a special type of loan used by older Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the financial security they need to fully enjoy their retirement years.

In general, counseling sessions are done face-to-face, although telephone counseling is becoming more prevalent.

No payments are due on a reverse mortgage while it is outstanding. The loan becomes due and payable when you cease to occupy your home as a principal residence. This can occur if you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out.

The home does not have to be sold to pay off the loan. You (or your heirs) can pay off the reverse mortgage and keep the home. In any event, the amount owed on the reverse mortgage can never exceed the value of the home at the time the loan must be repaid. Moreover, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.

Reverse mortgages are offered by banks, mortgage companies, and other financial institutions.

Three reverse mortgage products are available to consumers in the U.S. at the present time, and one product in Canada.

In the U.S., the most popular reverse mortgage is the federally-insured reverse mortgage, called the FHA Home Equity Conversion Mortgage Program (HECM). The other major product is the Home Keeper reverse mortgage, developed in the mid-1990s by Fannie Mae, a private national mortgage company.

One "jumbo" private reverse mortgage product, designed to accommodate seniors living in higher-priced homes, is offered by Financial Freedom Senior Funding Corp., of Irvine, CA. This is the Cash Account Plan. The HECM and Home Keeper products are available in every state, while Financial Freedom's product is offered in 21 states and the District of Columbia.

In Canada, the reverse mortgage product offered nationwide is the Canadian Home Income Plan.

For more information on reverse mortgages give Marcus Staley a call at (909) 347-1054

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