subject: Reverse Mortgage: Loan For The House-rich But Cash-poor [print this page] Do you need to finance a home improvement? Pay off a current mortgage? Supplement your retirement income? Take care of healthcare expenses? If so, a reverse home loan lender will do wonders for you. With a reverse mortgage, you can turn the value of your home into cash without having to repay your loan each month.
When Is It Repaid? A reverse mortgage is a loan taken out against your home. The best thing pertaining to it is that you don't have to pay it back for as long as you live there. Reverse mortgage lenders simply collect repayment when you
- die - sell your house - or move to another house and live there permanently
What Kinds Are Available? There are three basic kinds of reverse mortgages, and they're classified as outlined by who the reverse mortgage lender is.
1. Single-purpose reverse mortgage This is offered by non-profit organizations, state governments, and local agencies.
2. Federally-insured reverse mortgage This is also referred to as HECM, or Home Equity Conversion Mortgage. It's backed by the U.S Department of Housing and Urban Development, or HUD.
3. Proprietary reverse mortgage The reverse mortgage lender of this kind of mortgage is a private company.
Are There Other Differences Between Types? The 3 types of reverse mortgages also vary in other aspects, especially in their terms and manner of use.
1. Single-purpose reverse mortgage This has extremely low costs, and you can only qualify for one if you have a low to moderate income. There are two drawbacks to this kind of reverse mortgage. First, it isn't available everywhere. Second, it can just be used for the purpose specified by the government or by the reverse mortgage lender. This sort of purpose may range from paying for home repairs to paying off property taxes.
2. HECM and proprietary reverse mortgage These have a tendency to be costlier than the other 2 home loans. Actually, the up-front charges could be very high. These two kinds of reverse mortgage, however, are not without their benefits. For one, several reverse mortgage lenders offer them. For another, HECM and proprietary reverse mortgage lenders don't ask for proof of income or a bill of good health. Finally, these two mortgages might be used for any purpose.
How Much Can You Borrow? In single-purpose reverse mortgage, the amount is set in accordance with how much you need.
In a proprietary reverse mortgage or HECM, the reverse mortgage lenders offer amounts based on a combination of factors, such as:
- the kind of reverse mortgage you choose - present interest rates - the appraised value of your home - your address - your age
Reverse mortgage lenders put a high premium on age. As a principle, the older you are, the more valuable your home is. Secondly, the less mortgage you have left to pay, the more money you can receive.
How Will You Get What You Borrow? A reverse mortgage lender gives you cash in a number of ways:
1. all at one time, in a single chunk of cash 2. as a credit line, in which you can determine when and how much of the money available is paid to you 3. on a regular basis, with the amount and schedule of payment fixed 4. as a combination of the 3 earlier mentioned payment methods
How Do You Qualify? To be qualified for a reverse mortgage, you must be at the very least 62 years old and should live in your own house.
If you're cash-strapped, a reverse mortgage may simply be the answer you need. Be certain to research regarding this kind of loan first, however. In loans, as with all other things, it is better to be safe than sorry.
