Reverse Mortgage Providers - What You Should Know...
What is a reverse mortgage?
A Reverse Mortgage is a loan designed for seniors that allows them to tap into the equity that has built up in their home. A reverse mortgage provides tax-free cash advances, but requires no payments during the term of the loan. Since there are no monthly payments during the life of the loan, the balance grows larger and the equity gets smaller.
The loan is not due and payable until the borrower no longer occupies the home as a principal residence, e.g. the last surviving borrower sells, moves out permanently or passes away.
You can be as young as 60 years old and own your home or condominium in order to qualify for a reverse mortgage. There are no income or credit requirements to qualify. Based on the amount of benefit, which you qualify for, you may be eligible for a reverse mortgage even if you still owe money on your first mortgage.
There are three reverse mortgage loan products available, the FHA, HECM (Home Equity Conversion Mortgage), Fannie Mae HomeKeeper, and the Financial Freedom Cash Account.
Another benefit of these loans is that they are "non recourse" which means that no matter how high the loan balance grows, the borrower or their heirs never owe more than the home's market value.
The proceeds from a reverse mortgage can be used for anything: daily living expenses; home repairs and home improvements; medical bills and prescription drugs; pay-off of existing debts; education; travel; long-term health care; retirement and estate tax planning; and other needs you may have.
The proceeds from a reverse mortgage are available as a lump sum, fixed monthly payments for as long as you live in the property, a line of credit; or a combination of these options.
The amount of benefit that you will qualify for, will depend on your age at the time you apply for the loan, the type of reverse mortgage you choose, the value of your home, current interest rates, and for some products, where you live. As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be.
The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs. With a reverse mortgage, all of these costs can be financed as part of the mortgage.
You must first meet with an independent reverse mortgage counselor before applying for a reverse mortgage. The counselor's job is to educate you about reverse mortgages, to inform you about other alternative options available to you given your situation, and to assist you in determining which particular reverse mortgage product would best fit your needs if you elect to get a reverse mortgage. This counseling session is at no cost to the borrower and can be done in person or over the telephone.