Home ownership has long been "The American Dream." However, retired seniors, after reaching that goal, may find themselves in the position of owning a debt-free home - only to be left short on cash for daily living. For those retirees, there may be a solution. The Reverse Mortgage is a government-backed program that allows senior citizens aged 62 and over to convert a portion of their home's value into cash while retaining ownership. For many retirees, the Reverse Mortgage may hold the key to the New American Dream: owning a home and enjoying a truly comfortable retirement.

Reverse Flow – The Mortgage That Pays YOU

A Reverse Mortgage basically reverses the flow of cash, so instead of the borrower paying the lender, the lender pays the borrower. Obtaining a Reverse Mortgage allows the senior to keep their home while giving them access to the equity they have worked hard to build over the years. In addition, it gives them great flexibility on how they would like to use the proceeds. The payments are tax free and do not reduce Social Security, Pension, or other types of income.

There is no required repayment of the loan as long as the borrowers stay in the house, and repayment can never exceed the actual value of the home. That means, upon death of the borrowers, the Estate is not left with an outstanding bill at settlement. The sale of the residence will fully pay off the loan.

Seniors Can Enjoy Flexibility, Too

Reverse mortgages give seniors the flexibility to choose how they want to receive their equity proceeds. The cash can be distributed in various ways: lump sum, monthly payments, line of credit or a combination of these options. Because this program is backed by the federal government, it requires that potential borrowers attend independent third party counseling to fully understand the Reverse Mortgage program and process. A list of independent counselors will be available to clients.

For over 21 million senior homeowners across the country this could be a great way for them to enjoy a relaxed retirement the way they envisioned it. Funds can be used for any of the borrower's needs: health care, to pay off existing mortgages, home repair, property taxes, daily expenses, travel, and gifts. Throughout the life of the loan the borrower will always retain full ownership of the property. This loan program is a great opportunity for seniors living on a limited budget and should be considered by every senior citizen who owns a home.

What You Need To Know

Here are some important points when considering a reverse mortgage:

Eligibility: To qualify for a reverse mortgage, you must be at least 62 years of age. All owners who are on the title deed must meet this age requirement. You must also have paid off all, or most, of your home mortgage. Lastly, the home you reside in must remain your principal place of residence.

Mandatory Counsel: To receive a reverse mortgage, Federal law requires that you first undergo counseling to fully understand how this these mortgages work. This ensures you will make the right decision when it comes to choosing a plan. Also, the counseling service must be provided free of charge.

Tax-Free Income: A nice feature of reverse mortgages is the money you receive is considered tax-free income. The amount you will get depends on several factors including the plan you select, the type of cash advances you choose, your age, and the value of your home. Typically, the older you are, the larger the loan, as you will likely have more equity in the house.

Cost: The cost of a reverse mortgage varies considerably from one type to the next. However, you can typically use the money you receive to offset fees. The costs will be added to the loan balance and must be repaid with interest once the loan terminates.

Repayment: Reverse mortgages do not require any payment as long all borrowers remain in the home. Should the borrower(s) expire, sell the home, or permanently relocate, then the loan would be due in full, along with interest and additional costs. If two borrowers are on the loan and one expires, the loan would not be due while the remaining person still occupies the home.