October 8th, 2008 2:14 PM by Dennis ODonoghue
A Reverse Mortgage is a loan against the equity you have built up in your home that you do not have to pay back for as long as you live there.
Homeowners who are at least 62 years of age and have paid off their mortgages or have small balances left to pay are eligible.
In Illinois Reverse Mortgages are allowed under the Illinois Banking Act that defines a home that you live in, along with the attached property, as a “homestead” (if you own and live in your own residence you may be eligible for a general homestead exemption under the Property Tax Code).
The home that you own and live in must be a single-family dwelling or a two-to-four unit property to be eligible for a Reverse Mortgage. Stand alone houses, townhouses, condominiums (if FHA-approved) and some manufactured homes are eligible. The home has to meet HUD minimum property standards and be in reasonable condition; in some cases, limited repairs to the property can be made after the closing of a Reverse Mortgage.
With a Reverse Mortgage, you can get cash from your home’s equity without having to move or repaying the loan each month. Lenders receive the loan principal, plus interest, when the home is sold. Money remaining from the sale after the lender is paid goes to the homeowner or his or her survivors. If the sale of the home doesn’t result in enough money to pay off the loan, HUD will make up the shortage to the lender through an insurance program all borrows must participate in.
There are several ways you can get the cash from a Reverse Mortgage:
No matter how this loan is paid out to you, the loan typically doesn’t have to be paid back until you die, sell your home, or permanently move out of your home.
The amount you can borrow depends on your age, the interest rate, and the value of your home. For example, at an interest rate of 9% (which is higher than most of today’s current rates) a 65-year-old person could borrow up to 26% of their home’s value, a 75 year old could borrow up to 39%, and an 85 year old up to 56% of their home’s value.
For more information on Reverse Mortgages you may wish to contact the Illinois Department of Financial and Professional Regulation at: 1-217-785-2900, or any of the following websites and phone numbers: