Newspaper article St Louis Post-Dispatch (MO)

Reverse Mortgages Stir New Interest

Newspaper article St Louis Post-Dispatch (MO)

Reverse Mortgages Stir New Interest

Article excerpt

The reverse-mortgage market is expanding once again. Sometime this year, a second, nationally distributed loan program should make its way to a lender near you. For the first time, many borrowers will have at least two loans to from which to choose, one of which may offer far more cash.

Reverse mortgages are for older people who need extra money to live comfortably. The money comes out of home equity, with no current repayments required. It's definitely a loan but it feels like tax-free income.

The first national reverse mortgage was the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration and available in 48 states (all but South Dakota and Texas). It's a particularly good deal for people with homes of modest value.

The new loan, called Home Keeper, was created by Fannie Mae, the nation's largest supplier of money to the mortgage market. Only a handful of lenders are offering it so far. But Fannie Mae says that it ought to be widely available by the end of the year. Home Keeper may work particularly well for borrowers in higher-priced houses.

Since Fannie Mae first announced plans for the Home Keeper in November, it has fielded more than 80,000 consumer inquiries, said Robert Sahadi, vice president for housing initiatives. That's a record for Fannie Mae and shows the tremendous level of interest in these loans.

A reverse mortgage, like any other mortgage, is a loan against your home. But traditional mortgages provide you with cash up front that you repay in monthly amounts.

Reverse mortgages, by contrast, offer you three ways of getting cash: (1) In a lump sum - perhaps for paying off your current mortgage; (2) in monthly payments for as long as you live in the house (with some loans, payments last for life); (3) in the form of a credit line, which you can draw on whenever you want. The most popular choice gives you monthly payments and a credit line, too.

You don't have to repay until you move out of the house, in which case you'll owe the loan balance plus all the accumulated interest. In some cases, the lender may also claim part of the home's appreciation or even of its total value. …

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