The reverse mortgage is a loan that offers senior homeowners an opportunity to use a portion of the equity in their home. Instead of selling home or making payments, the lender pays for your house maintenance, repayment of a load, daily expenses, healthcare expenses or something else.
What is a reverse mortgage?
First originated in Netherlands, reverse mortgage is a form of equity release or lifetime mortgage. It is a special type of home loan that enables homeowners to convert a portion of the equity in their homes into cash without having to sell their homes, give up title or bear additional monthly bills. The responsibility of homeowners to pay back the loan is deferred until they die, no longer live in the property, violate the clause of the mortgage or the home is sold.
In general, borrowers can draw the mortgage capital through these ways: line of credit (could maximize the money available), lump sum (enables you to get the cash immediately, but the interest fees are the highest), monthly payments (over a predetermined period or lifetimes), or some combination thereof.
Today, the most typical and well-developed country for reverse mortgage is the United States. To be eligible for a reverse mortgage in the United States, borrowers are required to be 62 years of the age or older and own their homes freeandclear. Eligible homes usually include 1-4 family dwelling, condominium, co-op, permanent mobile home or manufactured home. There are no minimum income or credit requirements because borrowers make no interest or principal on the mortgage during the life of loan.
Main types of reverse mortgages in the United States
Reverse mortgages are mainly available in three types in the United States, including:
Home Equity Conversion Mortgage (HECM) – HECM is the oldest and most popular reverse mortgage product, backed by the U.S. Department of Housing and Urban Development (HUD). Compared to traditional home loans, this type of mortgage may be more expensive. However, it has no income or medical requirements and can be used for any purpose.
Single-Purpose Reverse Mortgage – This type of reverse mortgage is taken from some state and local government agencies and non-profit organizations. It may be the least expensive option on the part of the total costs of the loan. However, as specified by the lender, it has restrictions in terms of the purpose of the loan. Furthermore, it is not available everywhere.
Proprietary Reverse Mortgage – As the name implies, this type of reverse mortgage is private loans offered by private money lending companies. These private loan products seem more accommodating, especially for those who are not qualified for HECM or have special needs. However, they tend to be a bit more expensive.
How much money can you get from your home?
The amount of money available to borrowers will depend on six major factors:
The age of the borrower (In general, the older the borrower is, the more money he / she will get.)
The appraised value of the property (Whether the house needs renovation, repairing or paining, whether there is existing encumbrance on the house, etc)
Current interest rates
The value of the property
The reverse mortgage product you choose
Where you live, for some products
An Introduction to Reverse Mortgage
For homeowners who are 62 or older and have adequate equity in their home, a reverse mortgage can be the best method to get financial aid. You may ask: what is reverse mortgage? Well, it’s a type of loan designed to help seniors live a better retirement through getting money out of their home equity.
How does a reverse mortgage work? It allows the borrower to get the loan in a lump sum, via monthly payment or as line of credit. The best part is that a reverse mortgage does not require borrowers to make repayment as long as they are alive or at least still live in the house. The income is tax-free and will not be affected by the increasing or falling home price.
Besides, reverse mortgages have no restriction on how to spend the fund. That means you can use it to supplement your income, pay for your medical bills or purchase a new car. Notice that disadvantages also exist, such as high up-front costs, possibly serving fees and nondeductible interest rate, etc. So, be sure to know all the reverse mortgage pros and cons before you submit an application form.
Don’t worry if you still have a lot to ask and don’t know whether you should get a reverse mortgage. Simply do a little of research online and take advantage of reverse mortgage FAQ, and you will get all the answers.
Basic Information on Reverse Mortgage
Reverse mortgage is a very popular type of loan in the United States. With this mortgage loan, people are able to purchase new houses and properties with no down payments as well as zero monthly payments. All the senior adults over 62 are able to make use of reverse mortgage for we have reverse mortgage lenders across the United States now.
Senior residents in California must be excited to move to new homes without paying any money by applying for California reverse mortgage. The total sum of California reverse mortgage could be as much as 80% of the equity value of the applicant’s primary residence. If you are living in Florida, you can also get easy access to quality reverse mortgages. People can obtain Florida reverse mortgage easily by sending an application form including names, addresses, the lump sum they want and the appraised value of their homes(on condition that they are over 62).
The state of Texas also comes out with excellent reverse mortgage products to help its native senior residents. Texas reverse mortgage is only applicable to single family houses, condos, town houses, two to four unit homes, and manufactured houses built after June, 1976. Utah seniors who own house but lack cash can also obtain economic support from reverse mortgage. Borrowers are allowed to use the money of Utah reverse mortgage to pay for other existing loans, medical expenses, college tuitions, home improvements costs and other expenditures that can improve the quality of their life.
Reverse Mortgage Programs
Reverse mortgage is able to offer you with great help if you are seniors and try to benefit from the equity of your house. And there’re many reverse mortgage programs provided by different banks and organizations.
1. MetLife reverse mortgage comes with lower interest rates and more proceeds. Various options will satisfy all your needs of reverse mortgage and afford your living expenses.
2. Bank of America reverse mortgage comes with attractive benefits and offer dedicated help to borrowers of reverse mortgage who have troubles.
3. You must be cautious while you choose best reverse mortgage. You should do enough homework about reverse mortgage before you make decision. FHA reverse mortgage, also known as Home Equity Conversion Mortgage, is one of the most popular reverse mortgage programs. Once you meet the requirements, you can choose from five payment plans offered by this federal organization.