- January 14, 2019
- Posted by: Michael Meyer
- Category: Connecticut
History of Reverse Mortgages
I think many would be surprised to find out that the first reverse mortgage (also known as an HECM) was done over 50 years ago. The first reverse mortgages were originated in Portland Maine. A local banker came up with the idea that allowed the widow of his high school football coach to stay in her house. In 1983 The US Senate approves a proposal t0 have reverse mortgages insured by the Federal Housing Authority.
In 1988, HUD gained the authority to insure reverse mortgages when the bill is signed into law by President Reagan. Along the way HUD has made changes to the program to help educate and protect homeowners who look to reverse mortgages as a potential option. In 2016, more than 48,000 reverse mortgages were taken out that added up to 9 billion dollars in loan volume.
What makes a reverse mortgage an option some might choose? The program allows you to access the equity in your home while not having to pay a mortgage payment. With traditional mortgages the borrower(s) pay a mortgage payment that consists of principal and interest. As you pay the mortgage balance goes down. Reverse mortgages require no monthly payment. Interest is applied to the balance of the mortgage which increases over a period of time.
T0 qualify an individual needs to be 62 years or older. Own your own home and reside in your home. You must have the financial ability to pay the property taxes and insurances. Also you must have the equity required to pay off any existing mortgages or liens. Finally, borrowers will be required to take part in approved counseling. The counselor will help walk you through the process of getting a reverse mortgage and help with any questions you may have.
How Reverse Mortgages Work
A reverse mortgage is very flexible. You have the ability to use it for the following:
You can payoff existing mortgages or liens.
Payoff back taxes.
Borrowers can also payoff medical bills.
Use the funds for home improvements.
Finally, borrowers can use the money to supplement income for everyday expenses.
A reverse mortgage can also act similar to a home equity line of credit. If you have enough equity you can access the reverse mortgage on an as needed basis and use it for one of the several items mentioned above.
The concept of the reverse mortgage began with the idea of helping a widow stay in her home. The program has grown over the years and helps tens of thousands of people stay in their home.
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