What Seniors Need to Know About Reverse Mortgages
Reverse mortgages can help senior home owners with the cash they need during their retirement ages. Reverse mortgage allows them to remain and continue living in their same homes indefinitely while receiving monthly payments from the mortgage lender.
A reverse mortgage is basic in principle. Senior home owners can borrow against the equity in their homes. They get the cash while retaining ownership. This is different from a conventional mortgage, because no monthly payments are required. The amount derived from reverse mortgage does not need to be repaid until the home is sold, or the borrower moves out. A reverse mortgage can be taken, even if there is an existing conventional mortgage on the same property, waiting for the repayments to complete.
By using a reverse mortgage, the senior can be able to pay off the existing mortgage and gain additional or supplemental income to suit their lifestyles. The senior can also take the money as a lump sum or as a line of credit to draw upon, during times of need.
To qualify for a reverse mortgage, borrowers must be at least 62 years old and must own their home. The home must be the place of their primary residence. Reverse mortgages are insured by the FHA (Federal Housing Administration) an arm of the HUD (Housing and Urban Development Department).
The amount of money that a borrower is eligible for a reverse mortgage is calculated based on several factors like age of the youngest borrower, property value and the current interest rate. The loan limit for the HECM program (federally insured reverse mortgage) has been recently raised to $625,500 based on the economic stimulus package recently made into law by President Obama.
Heirs to the home can repay the amount due to the lender, plus interest and can continue to keep the home. Or they can sell it and use the proceeds to repay the loan to the mortgage lender.
There are some fees involved for taking a reverse mortgage. There are closing costs that need to be paid, and there is an origination fee and insurance premium to be paid also. The insurance is used to guarantee that the total owed debt will not exceed the value of the home.
Thus these are the main salient points that a senior home owner needs to know about reverse mortgages. For further information, it is advisable to contact a qualified reverse mortgage consultant.
