With all the news about the nation’s credit crisis, Atlanta Real Estate Forum (AREF)  brings you a series on the world of home mortgages. We’ve asked the experts at Five Star Mortgage about today’s best options for financing or refinancing your Atlanta home. In our first installment, Barbara Klonga, Five Star Mortgage’s expert on reverse mortgages, offers insight on the home loan product that is just for homeowners and homebuyers ages 62 and older.

    Reverse mortgages allow homeowners to take advantage of the equity in their homes to access cash NOW! As of January 2009, a reverse mortgage can also be used to purchase a home.  Instead of making a payment to a lender each month, the lender pays the mortgage holder.  AREF asked Klonga some common questions about reverse mortgages:

    AREF: What are the special requirements for getting a reverse mortgage?

    Klonga: You must be at least 62, have sufficient equity in your home, and use the reverse mortgage for your principal residence. Even homeowners with low credit scores can qualify. There are no income requirements, either. Plus, the new income you receive will not impact your Social Security or Medicare payments.

    AREF: How much money will I receive?

    Klonga: The amount of money awarded through a reverse mortgage depends on the recipient’s age, appraised home value and current interest rates. If you still owe on your home, then some of the reverse mortgage proceeds will be used to pay off the existing mortgage. Additional money can be used for any purpose.

    AREF: So the money can be used for anything?

    Klonga: Yes! Money from a reverse mortgage can be used for anything from help with daily living expenses to paying off debt to investing in a dream vacation.

    AREF: How and when is the money repaid?

    Klonga: The loan is repaid when the mortgage holder (or last surviving spouse) no longer occupies the home as a principal residence. The amount owed at that time will never exceed the value of the home at the time the loan is due. However, if the home is sold and brings more than the amount due, the excess goes to the mortgage holder or his or her estate.

    AREF: Do reverse mortgage holders receive a monthly check?

    Klonga: Some choose to receive a monthly payment for as long as they live in their home. Most people choose to set up a line of credit, which allows them to draw money as they need it. This line of credit grows by a fixed percentage between three and four percent each year. Others receive a lump sum or some combination of all of the payment types.

    AREF: How have recent events affected reverse mortgages?

    Klonga: With many Americans experiencing losses in their 401K accounts and retirement investments, more homeowners are turning to reverse mortgages as a means of supplementing income, paying off debt or just establishing an emergency fund. Recognizing the growing need for reverse mortgages, Congress recently raised the loan limit to $625,500, making reverse mortgages a viable, long-term option for even more homeowners and homebuyers.

    AREF: What’s the first step in getting a reverse mortgage?

    Klonga: Five Star Mortgage’s Web site has additional information, and of course we would be happy to work with anyone in acquiring a reverse mortgage. All homeowners also receive counseling from a local HUD approved counselor or an independent third party. This is a consumer protection measure to ensure that mortgage holders understand the program.

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