Everything about the new year says, “Going Forward,” but some home-buyers are inquiring about the wisdom of “Going Backward!” This is to say, they are curious about the “Reverse Mortgage.”

In the next two blogs, Palm State Mortgage will be bringing you some basic information about FHA insured reverse mortgages. These mortgages were designed for senior homeowners, but we believe savvy seniors must take a hard look at the advantages and disadvantages of this program before making such a decision.

Characteristics Of A Reverse Home Mortgage:

This type of mortgage has some identifiable traits, about which you should become educated before you rush into a commitment.

1.  Offered: If you are 62 and over, then you are in the group of homeowners that could use this loan.

2.  It is FHA insured, but it differs from all other mortgages simply because this loan is due when you no longer live in the home.

3.  To be approved and to keep your part of the bargain, you must prove the home is and will be, kept in good condition.

4.  Likewise you must pay property insurance and taxes.

5. This type of mortgage is useful for paying off an existing forward mortgage, so you no longer have monthly payments.

“The money also is often used for medical and daily living expense, according to a  2006 AARP survey.”

     First, The Good News! Viewing The Pros Of The Reverse Style

1. It is true, the homeowner can stay in the home permanently.

2. It is also true that the process pays off existing mortgages on the home.

3. It is not very difficult to qualify.

4. There will be no monthly payments due as long as you live in the home.

5. The homeowner can receive payments on flexible terms.

6. A reverse mortgage can not get “upside down” so you can “rest in peace,” because your heirs will never owe more than the home is worth.

7. It is also true that your heirs inherit the home. They will keep the remaining equity, once they have paid off the balance.

8. The proceeds from the loan are not taxable.

9. Yes! The interest rate can be actually lower than traditional mortgages, and lower than home equity loans.

And Now For the Bad News: Viewing the Disadvantages of The Reverse Mortgage

1. “The fees are the same as a traditional FHA mortgage but may be higher than a conventional mortgage because of insurance costs.”

2. Although your allowances should not be affected, Medicaid and other “need-based government assistance can be affected” if you withdraw too much money, and do not spend it within a months time- frame.

3. Many people do not understand this program. Unfortunately, it has been misrepresented on many occasions.

It is those mortgage program misrepresentations that will be discussed in next week’s blogs, as well as an investigation into what financial alternatives there might be to the reverse mortgage.

On the one hand, with careful study, you might find that a reverse mortgage is your way of going forward in 2014.

On the other hand, you might find a better way!  So please visit us again soon, for Part Two: of the Advantages and Disadvantages of Life In Reverse!