Why would a fifty five or sixty year old homeowner ever wish they were older? To qualify for a Reverse Mortgage, that's why! And who wouldn't want to?

With all of the frightening news we're hearing about Mortgages these days, it's nice to know there is a bright spot. At least there is for homeowners who are age 62 or over. That's the minimum age required for a homeowner to qualify for a Home Equity Conversion Mortgage.

Created by Congress in 1989, this government sponsored and federally insured mortgage program may be one of the safest mortgages available today.

Commonly referred to as a "Reverse Mortgage" or "HECM" for short, this mortgage requires no monthly payments. The interest instead, is added to the mortgage loan balance. The balance grows over time, but as long as the homeowners maintain the home and meet basic obligations, the loan never has to be repaid until the borrowers actually leave the home. The borrowers can never be forced out of their home, either.

Although a payment never has to be made, the Reverse Mortgage is extremely flexible. The homeowner can choose to make payments in order to stabilize or reduce that increasing balance. There are no pre-payment penalties. A homeowner choosing to make payments, does so knowing that, should they need the money for an emergency, they're not going to be getting "past due" notices or threats of foreclosure. This is good.

In the Forward Mortgage world, we hear about all kinds of horrible stuff. Rising Payments. Rising Rates, Foreclosures, and of course those "Negative Equity" stories. Negative Equity is when the mortgage balance becomes greater than the actual value of the house. Uh Oh!

The Negative Equity thing gets really scary. In a regular mortgage, the borrower almost always signs a Personal Note to secure the mortgage. This means that, if the home itself doesn't cover the balance of the loan, the bank can go after personal assets of the borrower. Cars, bank accounts, the first born - things like that. No wonder people are worried! Not only can they lose their house, they can lose everything else they own! Not good.

All of this bad stuff simply doesn't happen in the Reverse Mortgage world. The Reverse Mortgage is one of the only mortgages available where the borrower signs what is called a "Non-recourse" Note. The borrowers or their estates will never be responsible for more that the value of the house at the time they leave it. Worry Free? Could be!

Sub-Prime problems have made Reverse Mortgage rates even more attractive. The variable rate HECM, based on the conservative 1 year Treasury index plus 1%, looks absolutely "sterling" at a current rate of around 4.2%. The HECM fixed rate at about 6% is pretty competitive also. (If you're talking to a bank or broker who's showing you a HECM not based on the one year treasury, or with a margin greater than 1%, you may want to find yourself another bank or broker-quickly.)

Next, there's that Credit Score thing -- critical when applying for a regular mortgage. With the HECM? They simply don't care. If you're not making monthly payments, who cares what your payment history is. P.S. They don't care about your income either.

Finally, there's the Decreasing Home Value issue. Many homeowners, now desperately scrambling to re-finance, are wrestling with the fact that their house may have recently depreciated. That depreciation thing can decrease the amount of the mortgage they qualify for. Thus, the homeowner is forced to wait or can possibly even lose the house.

The HECM Reverse Mortgage is a different animal. They basically throw away Loan to Value concepts. The Reverse Mortgage has what is called a Pledged Value or Limit. This is a limit at which point, an increased home value simply doesn't matter. This limit currently varies based on the geographical area of the home. A formula is then applied to the limit, to determine the amount of mortgage money the borrower will qualify for.

As long as the home is still valued at or above the limit, borrowers don't have to wait for their home values to go back up, in order to qualify for the same amount of money. Depreciation in this case, simply doesn't matter.

The Reverse Mortgage is still a mortgage. It does come at a cost and there are other issues to consider. But, unlike some regular mortgages, none of those costs are hidden. They're all listed right there on the Good Faith Estimate. With so many advantages, the HECM borrower might simply ask, "How much is my peace of mind worth?"

Is the HECM Reverse Mortgage a breath of fresh air in the troubled mortgage markets? It is if you're age 62 or over!

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