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Mortgage Library: Types of Mortgage Loans: Reverse Mortgage
|Reverse mortgages - a special type of home loan - are becoming popular in America. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more.
Borrowers must be at least 62 years old and occupy as their principal residence a home that has little or no mortgage debt remaining. The maximum loan amount depends on the age of the borrower, the expected interest rate and the appraised value of the property.
There are many payment options available. For example, borrowers may receive monthly payments for a fixed period they select, or as long as they occupy the home as a principal residence.
Reverse mortgage need not be repaid until the borrower moves, sells or refinances the property, or dies. FHA insures the lender against the risk that proceeds from the sale of the property may not be sufficient to pay off the mortgage balance. If the property is sold, the homeowner (or heir) receives any proceeds in excess of the amount needed to pay off the mortgage.
To get a reverse mortgage loan, borrowers need to apply to a HUD-approved lender.