Reverse Mortgage Information
Reverse mortgages are becoming popular in the US. They can 'unlock' cash that is tied up and allow you to use it in anyway you want without the burden of monthly repayments or the worry of losing your home because of missed monthly repayments.
However, many are confused on this relatively new type of financial product and many, who would greatly benefit from this type of loan, are failing to understand what's on offer and the advantages and disadvantage of a reverse mortgage.
In order to decide if this product is right for you it's important to spend some time researching the subject: the more you know about reverse mortgages, the more informed choice you can make, whether to reject the idea altogether or, if you think one might be a good option for you, which would be the best reverse mortgage program for you.
What is a reverse mortgage?
A reverse mortgage can only be taken out by seniors who are at least 62 years of age, own their home outright or have little owing against it, and the home is their principal residence.
How does a reverse mortgage differ from a home equity loan?
Anyone can apply for a home equity loan. You must be a home owner and be over 62 to apply for a reverse mortgage.
With a home equity loan, the borrower must make monthly repayments on both the capital and interest. With a reverse mortgage there are no monthly repayments whatsoever - the debt is paid back in its entirety when the borrower(s) sells the home, no longer mainly resides in the home, or dies.
A home equity loan can be applied for on second homes such as resort homes. You can only apply for a reverse mortgage loan on your principal residence.
Missed repayments on a home equity loan can result in losing one's home. There are no monthly repayments with a reverse mortgage and no one can ever take away your home as long as pay your regular taxes, utility bills etc.
When applying for a home equity loan, the borrower must supply evidence of earnings, a health check and the lender will also run a credit check. Only a credit check is carried out when applying for a reverse mortgage; the lender is mainly concerned about the value of the home.
What are the requirements or restrictions when applying for a reverse mortgage?
As stated already, the borrower must be at least 62 years of age. There are no financial or health checks.
Even if you still owe some money against your home you may still be eligible for a reverse mortgage. The funds received from a reverse mortgage would be used to pay off the existing loan.
You can not apply for a reverse mortgage on secondary residences.
Reverse mortgages can be obtained on single family, one-unit homes. Some programs also accept two-to-four unit buildings that are owner-occupied with even some programs accepting condominiums and manufactured homes built after June 1976.
How much can I borrow?
A number of factors are taken into consideration by the lender; type of reverse mortgage applied for (see below), the appraised value of the home, location of your home, current interest rate, and, most importantly, your age. Generally speaking, the more valuable your home, the less you owe on it and the older you are, the more money you can borrow.
What are the different types of reverse mortgage?
- Federally-insured reverse mortgages. Known as Home Equity Conversion Mortgages (HECM), are insured by the U.S. Department of Housing and Urban Development (HUD). They are widely available, have no income requirements, and can be used for any purpose. The Federal Housing Administration (FHA) sets limits on how much a HECM reverse mortgage lender may lend you - based on your age, your home's value and location - and what your total loan costs will be. HECM loans give you a wide choice in how you may receive the cash. For home values under $400,000, HECM products generally provide larger loan advances than other reverse mortgages . You are required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan.
- Government-sponsored reverse mortgages. A Home Keeper® is Fannie Mae's conventional market alternative to the Home Equity Conversion Mortgage (HECM). It is a government-sponsored enterprise program and works like a HECM loan in many ways. However, a Home Keeper® reverse mortgage addresses a few needs that are not met by HECM loans, such as individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home. The current lending limit with a Home Keeper® loan is $417,000 (2007).
- Proprietary reverse mortgages. These are private loans with unique features that appeal to certain kinds of borrowers. They are more flexible in certain ways. You can usually borrow higher amounts than the maximum amounts stipulated in either a HUD or HECM loan.
In what ways do I receive the money from a reverse mortgage?
Depending on the program, there are various ways to receive the money.
- You can receive the money as a lump sum.
- You can receive fixed monthly amounts as long as you continue to live in your home.
- You can receive the monthly payments over a fixed period.
- You can get a line of credit, allowing you to withdraw funds as and when you see fit until the line of credit is exhausted (Texas, lines of credit are not permitted by state law).
- You can also choose to receive your money as a combination of the above.
How does a reverse mortgage affect my estate?
If you sell your home, no longer use it for your primary residence, or die, the loan, plus interest and other fees are paid to the lender as one lump sum. Any remaining equity, if any, belongs to you or your heirs. Importantly; none of your other assets will be affected by a HUD reverse mortgage loan. This debt will never be passed along to the estate or heirs.
Browse this website for more reverse mortgage information. You should weigh up the pros and cons before you decide if this type of loan or another, such as a home equity loan, is best suited for your requirements.
Copyright © 2007 (findyourreversemortgage.com) - Browse Our Reverse Mortgage Site