What precisely is a reverse mortgage?
A reverse mortgage is a mortgage loan that does not have to be repaid as long as you continue to reside in the home.
It can be paid to you in a lump sum, as a monthly income, or at the times and quantities of your choosing.
The loan and interest are only repaid upon the sale of the property, permanent relocation, or death of the borrower.
How are reverse mortgages utilized?
Most do not require repayment as long as the homeowner resides in the residence.
They are benefit of reverse mortgage repaid in full when the last surviving borrower dies, sells the property, or moves away permanently.
Since you do not make monthly payments, the amount you owe increases over time. By law, you can never owe more than your residence is worth when the loan is paid back.
You continue to own the property, so you are responsible for property taxes, insurance, and maintenance. If you do not, the lender may use the loan to make payments or require you to repay the loan in full.
Reverse Mortgage Eligibility
Beneficiary Homeowners
All residents must be 62 years or older.
At least one proprietor must occupy the home for the majority of the year.
Eligible Homes
Single-family, single-unit residence.
Two to four unit owner-occupied residence.
Some condominiums, townhomes, and manufactured residences.
Not eligible are cooperatives and the majority of mobile residences.
How Much Can I Receive Through a Reverse Mortgage?
Reverse mortgages can provide the following payment options:
Immediately in cash
As a monthly earnings
As a credit line that allows you to determine how much and when you wish to borrow
Any combination of the preceding
The amount you receive depends on your age, the value and location of your home, and the expense of the loan. Loans with the lowest interest rates typically go to the oldest homeowners residing in the most expensive homes.
Home Equity Conversion Mortgage (HECM), a federally insured program, provides the most money to the majority of individuals.
Reverse Mortgages: Types
Some state and local governments offer loans for specific reasons, such as paying for home improvements or property taxes. These are the reverse mortgages with the lowest costs.
Some institutions and mortgage companies offer loans that can be used for any purpose.
Costs associated with Reverse Mortgages
Typical fees associated with loans from banks and mortgage companies are as follows:
Fee for Application Insurance
Originating cost
Monthly maintenance fee
Closing expenses
Interest
Typically, these fees are applied to the loan balance (what you owe).
Loans are almost always the cheapest reverse mortgage available from a bank or mortgage company, and in many instances they are significantly less expensive than other reverse mortgages.
In general, reverse mortgages are most expensive in the initial years of the loan and become less expensive over time.
Before obtaining a reverse mortgage from a lender other than the government, thoroughly consider the additional costs.
