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The reverse mortgage is gaining popularity, especially among senior adults in America. Homeowners who meet the qualifications can use a reverse mortgage to supplement their social security income, pay medical bills, fund necessary home improvements, and cover other expenses.
Here’s how the reverse mortgage works. A homeowner can convert part of the equity in the home into cash, as a special home loan. This is the equity that has accumulated with years of mortgage financing payments made in paying for the house. But the reverse mortgage is different from a traditional home equity loan or a second mortgage, because the homeowner does not have to make monthly payments to repay the loan as long as he or she lives in the home. There are many details related to the homeowner’s age, the current interest rate, and the value of the home. But usually, the older homeowner with the more valuable home can borrow more.
The U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration offers the Home Equity Conversion Mortgage, one of the first reverse mortgages created. You can find more information about whether or not the reverse mortgage is a good financial option for you on the HUD website at www.hud.gov