Reverse Mortgage – Everything You Need to Know
It is generally believed that majority of American senior citizens, although possessing considerable equity in their homes, are actually lacking in liquid assets. In other words, most retirees have homes that have been completely paid but do not have a lot of actual cash to pay for their other needs.
If you are in such as situation and are 62 years old or over, you can actually obtain a considerable amount of cash by using your home’s equity to avail of a reverse mortgage loan.
Reverse mortgage loans are still quite new, which is why a lot of people are not yet familiar with it. To help you gain a better understanding of this type of loan, following are some of the fundamental elements that you should know.
What is a reverse mortgage loan?
A reverse mortgage loan is a type of loan that allows you to get the monetary equivalent of a portion of your home’s equity.
What is the difference between a reverse mortgage loan and a home equity loan?
A regular home equity loan has to be paid back in regular monthly payments, along with interest. With a reverse mortgage loan, you are the one that gets paid. The only conditions are that you stay alive and that you keep using the home as your primary residence. Repayment of the reverse mortgage loan occurs only if you die or if you move out of the house for good.
Are there different types of reverse mortgage loans?
You can actually choose from three different types of reverse mortgage loans, although most people opt for the Home Equity Conversion Mortgage or HECM, which is handled by the HUD under the FHA. In addition to passing the age and home ownership requirements, you would also need to undergo a brief counseling session before you can qualify for loan approval.
Besides the HECM, there are also reverse mortgages offered in personal finance and in other areas, although these are not always considered to be ideal solutions. The differences in each of these options, as well as the advantages and risks involved, can be explained to you by a counselor.
How much money can I get on a reverse mortgage loan?
This largely depends on the value of your home, the current interest rates, the maximum allowable loan in your county, and your age. If you are taking out the loan jointly with other people, i.e. your spouse, the age of the youngest borrower will be considered.
The exact formula for calculating the amount of money that you qualify for will depend on the lender but in general, the older you are and the higher the equity on your home, the higher the amount that you can get.
What is a non-recourse loan?
The term non-recourse loan is frequently used to define a reverse mortgage loan. It essentially means that it is a non-assignable loan. What will happen should you die is that the load will be paid back by means of the proceeds of selling or refinancing the home. Everything else that is left over will be left to your heirs.