Reverse mortgage for a farm

Reverse mortgages are instruments whose importance may exceed the intention of the pieces of legislation that create them.  Since the American Homeownership and Economic Opportunity Act were passed, there has been tremendous confidence by seniors in this country on their ability to withstand the tests of retirement.

Seniors who are at the age of 62 years old and above qualify for this loan.  Generally, they have to prove to the lender that they have a home and that they possess home equity in it.

So what is a farm reverse mortgage?  These are, in simple, a loan against your farm.  The lender will in theory buy your house in installments, lump sum or in any other agreed on manner to allow the mortgagor to have that extra income. 

Unlike the conventional mortgage, neither the title nor the possession of the farm will pass to the lender.  Their only recourse is to dispose off the farm after the death of the mortgagor, and after his/heirs have failed to secure the reverse mortgage property after one year since the death.

Farm and house reverse mortgages

Just like in the normal reverse mortgage, an applicant must prove ownership of the farm that is about to be reverse mortgaged.  The lender will not require any credit rating, employment record or a constant flow of income to advance such a loan.

Methods of reverse mortgage trickle down

A farmer who has applied for a reverse mortgage will have several options to choose from when deciding on the method of receiving the advanced money.  They will include the following:
A single lump sum of cash;

• Monthly advancements;
• An account with a credit line where the funds will be released in stages; and
• A combination of all or any of the above modes of payment.

Now, the decision on the appropriate method will depend on the mortgagors’ financial condition and needs.

Some uses of a farm reverse mortgage

A senior who only needs to have money for their upkeep and has a farm can access a reverse mortgage.  Once he/she proves that they have sufficient home equity then lenders will rarely deny them the loans.

One of the major reasons why individuals will take reverse mortgages is to ensure that there is continuity in their farming.  They may also decide to further improve farm output to cover for the now sole dependence on the farm.

Healthcare which is a critical part of a senior’s life will depend so much on access to credit and other money sources.  Maintenance of pre-retirement health standards is possible with the acquisition of a farm reverse mortgage.

Payment of an existing debt is also possible once one is able to access the loan.  This is technically known as debt refinancing.  It will therefore be possible to condense your debtors into one thus avoiding accounting and other due diligence reviews of your farm and debtors in your sunset years.

Seek advice

However, as much as this position sounds so rosy, a blind acquisition of loans may be detrimental. It is always advisable to seek counsel from the many institutions including HUD funded and/or approved agencies.

References

• http://www.farmreversemortgages.com
• http://online-reverse-mortgage.com/ar/farm-reverse-mortgages.php
• http://virtual-publications.blogspot.com/