| If Your Equity has Declined | | | | and still meet their financial obligations. |
| Many areas of the country can be designated risky | | | | To qualify for most reverse mortgages, you must be |
| markets using zip codes to outline declining home | | | | at least 62 and live in your home. The proceeds of a |
| values. If your home equity HELO was based on a | | | | reverse mortgage (without other features, like an |
| home whose value is no longer what it was, you may | | | | annuity) are generally tax-free, and many reverse |
| find yourself reading a letter that goes something like | | | | mortgages have no income restrictions. |
| this..... | | | | Reverse mortgage loan advances are not taxable, |
| Because of declining home values in your area we no | | | | and generally do not affect Social Security or |
| longer can provide any money based on home equity | | | | Medicare benefits. You retain the title to your home |
| from this date forward. The lenders are using | | | | and do not have to make monthly repayments. The |
| automated (computer driven) models to determine the | | | | loan must be repaid when the last surviving borrower |
| new value of your home and are declining to continue | | | | dies, sells the home, or no longer lives in the home as a |
| your revolving credit line with the home as collateral. | | | | principal residence. |
| How it Works | | | | What You Should Know |
| When the value of a home is reduced, the amount of | | | | Reverse mortgages can use up all or some of the |
| money you have as mortgage or HELO debt as a | | | | equity in your home, leaving fewer assets for you and |
| percentage of the value of a home rises. This is the | | | | your heirs. A "non recourse" clause, found in most |
| loan to value ratio and the industry standard for a loan | | | | reverse mortgages, prevents either you or your estate |
| is a LTV of around 80%. That is 20% of the home is | | | | from owing more than the value of your home when |
| debt and the rest is yours. If your home value has | | | | the loan is repaid. |
| declined your debt as a percentage of value has | | | | Because you retain title to your home, you remain |
| increased. | | | | responsible for property taxes, insurance, utilities, fuel, |
| Reverse Mortgages: What is it | | | | maintenance, and other expenses. So, for example, if |
| In a conventional mortgage, you make monthly | | | | you don't pay property taxes or maintain home |
| payments to the lender. But in a "reverse" mortgage, | | | | owner's insurance, you risk the loan becoming due and |
| you receive money from the lender and generally don't | | | | payable. |
| have to pay it back for as long as you live in your | | | | Thanks for Reading |
| home. Instead, the loan must be repaid when you die, | | | | Howard Bell |
| sell your home, or no longer live there as your principal | | | | A web site of over 450 articles related to real estate |
| residence. Reverse mortgages can help homeowners | | | | focused primarily on property management. |
| who are house-rich but cash-poor stay in their homes | | | | |