What Should You Know About Reverse Mortgages?
Common reasons for applying for a reverse mortgage include seeking extra income to supplement social security paychecks or seeking full-time retirement. In order to qualify, the home must be a single dwelling home, a townhouse, or a two to four condominium unit. Mobile homes will not qualify for this type of mortgage.
Keep in mind that these equity mortgages are not available to everyone. They are almost exclusively considered government loans by the Department of Housing and Urban Development and are only granted to those 62 years and older. Other stipulations include owning the home outright and being required to use the proceeds of the reverse mortgage to pay off the remainder of the home before taking the remainder of the lump sum.
There are determining factors for how much a person can borrow. These include the age of the person, the value of the home and the current mortgage interest rates available. Typically, more is available to those with a higher home value and to those who are older. HUD does not take into consideration a person's income as a deciding factor of how much they can borrow.
There are also different ways to receive your cash equity amount in your reverse mortgage. This includes: tenure, equal monthly payments as long as the borrower lives in the house; term, equal monthly payments for a fixed number of months; line of credit, in installments or when the borrower needs the cash until the credit amount is exhausted; modified tenure, a combination of a line of credit and monthly payments for as long as the borrower lives in the home; modified term, a combination of a line of credit and monthly payments for a set period of time.
How the equity mortgage gets paid off is a big concern to main interested in this type of mortgage. The borrower is not required to repay the loan as long as they continue living in the home. If they have to go into a care facility for more than 12 months, the home is sold, or the owner passes away, the estate will pay the remainder of the loan or the loan will be paid off from the proceeds of selling the house.
If an interested party is concerned that their home will be sold but wants to keep the home in the family name, they can rest assured that their home will not be taken as collateral. Instead, upon the death or moving out of the borrower, their estate will help to cover the costs of the amount borrowed and the home will remain in the family name if so desired.