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Lower Interest Rates Make Reverse Mortgages More Attractive

March 26, 2009

By Clark Schultz | Money Rates Columnist

A reverse mortgage allows senior citizens, of at least the age of 62, to convert equity from their principal residence to cash. Similar to a normal mortgage, lower interest rates help make the mortgage more affordable. The Federal Reserve's significant pledge to buy more than a $1 trillion worth of mortgages securities is expected to help keep mortgages rates low for an extended period of time. For anyone over the age of 62 years with a pressing financial need, the timing for a reverse mortgage may be now.

Their are two primary reasons to consider a reverse mortgages.

CASH FLOW - Any senior citizen facing negative monthly cash flow could benefit from borrowing against the equity in their house. Installment payments from a reverse mortgage can help seniors make their required monthly payments.

EMERGENCIES - A sudden and unanticipated change in monthly expenses can catch senior citizens in a position where they don't have the time to set up their reverse mortgage as fast as they need the funds. By opening a reverse mortgage line of credit, the funds are instantly accessible by check. Just like a home equity line the interest will not accue if the balance is zero.

Setting up a HUD-approved reverse mortgage requires receiving consumer information from a mortgage counselor. To apply an applicant does not need income, but the appraised value of their house, the applicant's age and the current level of interest rates will determine how much money is available through a reverse mortgage. Reverse mortgages rates will vary from case to case due to all the factors considered. The U.S. Department of Housing and Development which regulates reverse mortages has detailed information about reverse mortgage loans on their site

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