Reverse Mortgage Information

If you have reached your twilight years or have just retired, and you are finding yourself a bit hard on the finances, then a reverse mortgage can help you fund your lifestyle.

Home owners with minimum age 62 can tap the equity in their homes as a source of dependable monthly income for life.

With a reverse mortgage, a senior can borrow a portion of their home equity, as a lump sum or in the form of monthly payments for a lifetime. Some part of or the entire loan can be made available through a line of credit to draw on. The money borrowed under a reverse mortgage does not need to be paid back until the senior moves out of the home or dies. The accrued interest keeps adding to the loan amount. This amount needs to be paid off from the proceeds of the sale of the home. Anything left can go to the senior or the heirs.

Reverse mortgages can be insured by the government. You will then need to pay an insurance premium about 2% of the home value. There are also origination fees of about 2% of the home value. There are also closing costs involved for appraisals and title insurance. This can be around $2500. If your home is appraised at say $400,000, the closing costs will be around $17,000. You don’t have to pay these fees in cash as they can be added to the loan.

The amount you can borrow on a reverse mortgage varies based on your home value and on other factors like interest rate and borrower’s age. The lower your interest rate, the more that you can borrow.

Even if your home is worth more than the current federal cap of $417,000 you can only draw from maximum home value of $417,000. Law makers are considering a proposal that would raise this ceiling to $625,500.

Even if the senior dies, the lender just wants to be paid. This can be done with the proceeds of the home sale. If the heirs want to keep the home they have to pay off the loan.

It is possible to get a reverse mortgage even if you have a regular mortgage running. You can typically pay off your regular mortgage so you don’t have to make regular payments on your existing mortgage any more. Then you can enjoy the monthly payments you get from the reverse mortgage for the remaining balance.

To learn more about reverse mortgage it is advisable to visit a reverse mortgage counselor or expert.