Seniors, consider a reverse 2nd mortgage

Many cash-strapped senior homeowners face a daunting problem.

With many on fixed incomes, there is scant “extra” money to pay off credit cards and other debt, take care of home repairs or perhaps pay out the ex in a silver divorce.

Because few want to touch their once-in-alifetime 3% first mortgage to pull cash out, home equity lines of credit or fixedrate seconds are options worth a look.

But those types of loans often come with rigorous income standards, which will prevent certain older Americans from qualifying for a second mortgage.

But there may be an easier way — a no-payment-required reverse second mortgage. The loan is the first I’ve found by a reverse lender, and full disclosure, it’s a company I do business with. I’m sure there will be similar reverse second mortgages in due time; there always are in my experience.

Here are some of the basics from Finance of America Reverse LLC:

• Qualifying is based on a complicated residual monthly income (what’s left over) formula, family size and region of the country. Regardless, it is certainly a lower threshold than a home equity line of credit or fixed second because there is no monthly payment to factor.

• Unlike the FHA reverse mortgage, the home equity conversion mortgage, all borrowers (husband and wife, for example) must be at least 55 years old. Like the standard reverse, the maximum loan amount is calculated, in part, based on the date of birth of the youngest borrower.

• Borrowers never make a payment on the reverse second. But of course, nothing is free. The loan balance negatively amortizes, meaning it grows each month based on a fixed, 9.99% interest rate.

In other words, the balance of the reverse mortgage is still owed. Heirs likely would walk