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How Fannie Mae's New Plan WorksThe example assumes a 76-year-old woman wants to sell a house she owns free and clear--and buy a new one without having to make mortgage payments. -- She sells the old house for $75,000. -- She applies to Fannie Mae for a ''reverse mortgage'' loan to buy a $115,000 house. -- Based on her $75,000 in equity, plus other factors such as age, Fannie Mae gives her a $60,000 loan at a rate about a point higher than a conventional mortgage. -- She then uses the $60,000 loan plus $55,000 from the sale of her old house to pay for the new house and live there without making monthly mortgage payments. -- She keeps $20,000 from the $75,000 sale proceeds. -- When she moves or dies, the house is sold, and the loan balance gets paid off from the proceeds.
DATA: FANNIE MAE, BUSINESS WEEK
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Updated July 31, 1997 by bwwebmaster
Copyright 1997, by The McGraw-Hill Companies Inc. All rights reserved.
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