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Top Eight Things to Know if You're Interested in a Reverse Mortgage |
Reverse mortgages are becoming popular in America. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you!
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until you no longer use the home as your principal residence.
To be eligible you need to be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance, and you must live in the home.
To be eligible your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. Many condominiums and manufactured homes are also eligible.
With a home equity loan, you must have sufficient income to qualify for the loan and you are required to make monthly mortgage payments.
The reverse mortgage is different in that it pays you, and is available regardless of your current income.
You don't make payments, but like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities.
No. You do not need to repay the loan as long as you continue to live in the house and keeps the taxes and insurance current.
When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home belongs to you or to your heirs.
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
You have 3 options: