For those who’ve owned their home on Oahu for at least six years, chances are, you have built up a large amount of home equity.  If you’re retired, you may be considering a reverse mortgage given the equity market’s slide over the last year.  Reverse mortgages allow owners to swap their home equity for cash, while still owning and living in the home. 

Reverse mortgages are available to people at least 62 years of age, who own their home and use it as their primary residence.  The main source of financing is through the Federal Housing Administration (FHA) Home-Equity Conversion Mortgage (HECM) program.  The HECM loan limit is $625,500 (until December 31, 2009) and many factors determine the amount you can borrow such as your age, current interest rates and your home’s value.  Funds obtained from a reverse mortgage are tax-free.

If you qualify, you choose how to receive the money.  You can receive a lump sum up front, opt for a monthly cash payment or choose a combination of the two.  Be advised, reverse mortgages are costly to originate and you also pay an insurance premium.  The insurance guarantees that if the company managing your account (commonly called the loan servicer) goes out of business, the government will step in and make sure you have continued access to your loan funds.  The insurance also guarantees that your total debt will not exceed your home’s value when the mortgage must be repaid.

For more information and a list of brokers, please visit reversemortgage.org.

You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.