Understanding The Reverse Mortgage Fundamentals
Many retirees may have a sudden need for extra cash to pay for home improvement or
to supplement retirement income or meet medical bills; A reverse mortgagemay be a good idea.
Reverse mortgage allows a home owner to borrow against the equity in a home. However, unlike a home equity loan, the loan and the interest do not have to be repaid until the home is sold. You can receive money either lump-sum or receive fixed monthly payouts for a period of time or open a line of credit that you can draw against or even receive a combination of these options. It may sound too good to be true but its possible to use your home to help you in your golden years.
There are predominantly three types of reverse mortgages.- Single purpose reverse mortgage, offered by some state and local government agencies and nonprofit organizations.- Federally-insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs) and backed by the U. S. Department of Housing and Urban Development (HUD) and- Proprietary reverse mortgages - private loans that are backed by the companies that develop them
Single purpose reverse mortgages are not available everywhere and can be used for only one purpose which is specified by the government or the non-profit organization. For example, the lender may mention that you may use it only to pay for home improvement, repairs or property taxes. Most home owners with low or moderate income can qualify for this type of loan.
On the other hand, HECM is the oldest and most popular reverse mortgage product. HECMs are insured by the Federal Government through the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development. The amount of available proceeds you can qualify for under the HECM program depends on your age, appraised home value, and current interest rates. The older you are, and the more valuable your home (and the less you owe on your home), the more funds you qualify for. The primary drawback to HECMs is that the maximum loan amount is limited.
Proprietary reverse mortgages are available from a variety of lending institutions. The primary advantage of these reverse mortgages is that they offer loans in amounts that are higher than the HECM limit. One of the drawbacks of non-HECM loans is that they are not federally insured and can be significantly more expensive than HECM loans.
With this
reverse mortgage informationyou can choose which option is mostly likely suitable for you. You can get in touch with your real agent to find the value of your home and how you can increase the equity of your home. Reverse mortgage is based on the value of your house, So if there is an opportunity to increase the value of your house by doing some home improvements, you may want to get it done before applying for a reverse mortgage.
Lets weigh in the benefits of reverse mortgage over other borrowings from other sources; options which will resolve
reverse mortgage questions. Unlike other types of loans based on your home's equity, a reverse mortgage doesn't require a check on your credit history and the lender doesn't assess your income level. There is typically a cap on the interest rate which prevents the lender from charging excess fees on your mortgage. The balance of the loan isn't due until you are living in the home. In many cases, you'll never have to worry about paying off the loan balance.
by: Ask Bill
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