Reverse Mortgages May Stop a Foreclosure

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Homeowners who are concerned about foreclosure look everywhere for help and some turn to the reverse mortgage.
These homeowners often bought their residence at some point within the past two to five years, at a time when the real estate market was strong and values were quickly rising.
These homeowners had great expectations of making payments for a short while and thought that they would then refinance or sell, realizing a profit.
However, their large mortgage soon became a burden.
Now they are having trouble keeping up with the mortgage due to loss of employment, declining retirement income, or bad financial planning.
It is possible for a reverse mortgage to save these people from their burden.
However, a reverse mortgage will not help all of them.
They must be over the age of 62 years and have ample equity to qualify for assistance from a reverse mortgage.
The money received by a reverse mortgage could satisfy their current mortgage(s), thus ridding them of their mortgage payment completely.
If they qualify, then they will be freed from their fears of foreclosure.
However, many of these homeowners will not qualify for a reverse mortgage due the amount of equity that the program requires.
If, for example, the senior homeowner took out a loan totaling $500,000 on a house with an appraised value of $600,000, then a reverse mortgage would not possible.
A reverse mortgages requires significantly more home equity.
Lenders have this requirement because for as long as the homeowner lives there, the lender cannot ask the homeowner for a mortgage payment.
So when can a reverse mortgage assist a homeowner who is facing foreclosure? In short, when they have adequate equity.
The amount required depends on the circumstances and is related to their age - the older they are the more equity they will need.
The amount of equity they need decreases proportionally with their age depending on interest rates, the home's age, and its location.
The amount of money made available under a reverse mortgage (to pay off an existing mortgage or for any other purpose) is usually between 30 and 60 percent of the home's value.
The reverse mortgage is an excellent tool to allow the senior homeowner to pay off all existing mortgages on a piece of property, if that homeowner qualifies for a large enough amount.
The amount must be adequate to pay off all loans, including second mortgages, as they are not permitted along with a reverse mortgage.
All unpaid liens must be paid off, including all overdue taxes and judgments.
If the grand total of all those debts is greater than the total loan amount available under the reverse mortgage, then the homeowner will not qualify.
That is unless they can pay down enough of the debt for the reverse mortgage to cover the rest.
Many senior homeowners facing foreclosure can benefit from the reverse mortgage.
Those homeowners who are under 62, and are thus considered to be "too young," and who have not established adequate home equity, will be forced to look other places for help.
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