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Basics About Reverse Mortgages A reverse mortgage is a loan against your home
which does not have to be paid back for as long as you live there. In
other words, the purpose of a reverse mortgage is to get cash from your
home. Usually, the older
you are and the greater your equity, the larger the reverse mortgage
benefit will be. It is also
a non-recourse mortgage which means you can never owe more than your
home is worth at the time the loan is repaid.
You continue to own your home but because of the interest, your
debt increases and your home equity decreases. Generally, reverse mortgages must be first
mortgages. Any debt on the
home must be paid off before getting a reverse mortgage or with money
from the reverse mortgage. When
you die, sell or permanently move out of the home, the reverse mortgage
must be paid in full. Eligibility requirements are pretty simple. All owners of the home must be 62 years of age or older and the home must be the primary residence for each owner at least six months of the year. However, not all types of owned homes qualify for
reverse mortgages. Mobile
homes and cooperative apartments are usually ineligible.
Some multiple unit dwellings, planned unit housing and
manufactured housing are also ineligible. How much money you can get from a reverse mortgage
depends mostly on the particular plan you choose as well as the kind of
cash advances you want. The
money from a reverse mortgage can be paid to you all at once, or as a
regular monthly sum. You
may opt for a credit line that provides you with the flexibility of
deciding how much and when to use the funds.
You may also decide on some combination of these payment plans. No matter which reverse mortgage loan product you
select you remain the owner of your home.
Consequently, the maintenance, property tax payments and
insurance payments remain your responsibility.
If you do not fulfill these obligations, reverse mortgage lenders
can call for repayment of the loan. The Home Equity Conversion Mortgage (HECM) is the
best known and available reverse mortgage.
Insured by the Federal Housing Administration (FHA) (which is
part of the U.S. Department of Housing and Urban Development (HUD),
these loans are under the guidelines of the FHA.
The FHA mandates how much HECM lenders can lend you depending on
your age and the value of your home.
An HECM loan often
provides greater loan advances than other reverse mortgages.
It is generally offered by mortgage companies and banks.
Costs incurred obtaining a reverse mortgage are similar to
closing costs of a conventional mortgage.
The HECM program limits your loan cost and the FHA guarantees
that lending institutions meet their obligations. In order to be eligible for an HECM loan, you must first contact a HUD approved counselor. To find one you may use URL: http://www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm Regardless of what type of reverse mortgage loan product you are considering, you will need to speak with an independent reverse mortgage counselor before applying. Depending upon your particular situation, a reverse mortgage may have tax consequences. It could also affect your estate matters and possible future eligibility for Federal and State assistance programs. There are many factors to consider. A trained advisor has the knowledge to guide you to a plan tailored to your advantage. You may use the URL above to find a counselor. Many offer free initial consultations so be sure to ask. |
