A reverse mortgage is a program in which seniors who own their houses outright can choose the equity and turn it into money to live on during retirement. There are qualification criteria. However, there aren’t any loan payments to make, for example with a traditional home equity loan, and there’s absolutely no way to default on the loan and be foreclosed on. If you qualify for a reverse mortgage, you don’t need to pay back the loan until you do not reside in the home.
Before you attempt to get a reverse mortgage, then make sure you qualify. Not everybody does. First, as the homeowner, you must be at least 62 years old. Also, you should either possess the home paid off, or your present mortgage balance must be small enough to be repaid by the reverse mortgage proceeds. Finally, you must be residing in the home. Reverse mortgages are not offered for leasing property or second homes.
Type of Home
In most instances, you must own a single-family home to qualify. But there are exceptions. If you own a home which has around four different units, you can get a reverse mortgage as long as you’re living in one of the components. In the event that you’re trying to get a reverse mortgage through the Federal Housing Administration, you can certainly do so in the event that you own a condominium or a manufactured or mobile home, as long as you own the property and your home meets FHA criteria.
How much you receive in a reverse mortgage is dependent on three variables, according to the FHA: that the homeowner's age, the home’s assessed value and the current rate of interest. The older you’re, the greater the chance that you ’ll receive a bigger mortgage. You'll also receive a bigger mortgage if your home is more precious and if interest rates at the moment you receive your mortgage are reduced. The loan is yours as long as you own the home and you’re living inside, unless you decide to place a predetermined quantity of time on the loan.
The FHA reports you will find five ways for reverse mortgage payments. You’re able to accept equal monthly payments two different ways: either for the length of time you reside in the home or for a predetermined time period. Third, you can take a credit line. Oryou can take a combination of a credit line and periodic payments two different ways: either for the length of time you reside in the home or for a predetermined time period.
Paying It Off
Among the advantages of a reverse mortgage is that you don’t need to pay off it until you either move from the home or sell it, or even the previous homeowner dies. Once that happens, the proceeds of the sale goes toward paying off the reverse mortgage. When an estate is in charge of your home after you die, any proceeds left over from the sale will go to your heirs.