Page 59 - FOP JUNE Newsletter

Reverse mortgage basics
Reverse mortgages, once scorned and mis- understood, have recently experienced a re- naissance. Thanks to increased competition within the lender marketplace, this powerful financing tool, once again, has become known for creating positive borrowing options for re- tirees.
So what exactly is a reverse mortgage?
ward the loan balance.
The borrower must remain current on property taxes and homeowner’s insurance. With a reverse mortgage, the borrower always retains title or ownership of the home. The lender does not, at any point, own the home – not even after the last surviving spouse permanently vacates the property. The amount of funds for which a borrower is eligible depends on his or her age (or, in the case of couples, the age of the younger spouse), the value of the home, interest rates and upfront costs. The older
the borrower, the greater the loan proceeds he or she may receive.
There are limits on the amount of funds a bor- rower can access during the first 12 months after closing. This amount varies based on the type of
JOHN ARETOS
Available to homeowners 62 years of age or older, a reverse mortgage is a loan allowing for part of one’s home equity to be converted into cash. This product was originally conceived as a means to
help retirees with limited income use the ac- cumulated equity in their homes to cover basic monthly living expenses. However, there is no restriction as to how reverse mortgage proceeds
can be used. The loan is called a reverse mortgage because, instead of making monthly payments to a lend- er, as with a traditional mortgage, the lender makes pay- ments to the borrower. The borrower is not required to pay back the loan until the home is sold or otherwise va- cated. As long as the borrower lives in the home, he or she is not required to make any monthly payments to-
Finance
reverse mortgage loan disbursement option the borrower chooses. Lenders will review all of the bor- rower’s income streams such as social security and pen- sions, plus any additional resources such as investments. Borrowers will have to provide documents such as tax re-
turns and bank account statements.
While there is no minimum credit score requirement,
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