Preventing Foreclosures With a Reverse Mortgage
Sometmes a reverse mortgage can be used to prevent a foreclosure of a regular mortgage. There are two typical ways this can be done.
1. The homeowner aged 62 or older is heading for or in foreclosure. The amount they owe is less than the amount available in a reverse mortgage. For example, the amount owed is $150,000 but a reverse mortgage could provide $200,000 for that person based on their age and the value of the home. While reverse mortgage do now involve a review of credit history, this may still be a solution to remain in the home. At the same time, the payments will go away, perhaps with some money left over. Instead of all the stress involved with not being able to make the payments, the borrower finds themselves much better off than before.
2. A homeowner under the age of 62 owes back payments and is heading for or in foreclosure. There was a situation that caused them to get behind on payments that has been corrected. If they could make up that amount, they would be in a position to make the regular payments on their loan. This is when a homeowner over the age of 62 might be able to help the younger homeowner. In most cases, the older homeowner would be a close relative (parent or grandparent) although that is not required. So often a close relative would like to help but just doesn't have the funds. By doing the reverse mortgage, they could gift the shortfall to the younger homeowner to make up their back payments and get back on their feet.