Reverse Mortgage Info
A reverse mortgage is a financial tool that allows borrowers to withdraw some of the equity in their homes. It is a safe plan that is insured by the Federal Housing Administration (FHA). It is not only safe but also it provides financial security. A large number of seniors use a reverse mortgage to supplement Social Security, settle health bills, repair and renovate their homes. However, it is advisable to know adequate information about it before obtaining it.
What is a reverse mortgage?
A reverse mortgage is the home loan that allows the borrower to turn some of the equity in the home into cash. Borrowers are not obligated to repay the loan until they do not use the home as a primary residence or cannot meet the mortgage’s obligations. A reverse mortgage can be used to purchase a primary residence if the borrower has the cash to pay the difference of the reverse mortgage proceeds and the sales price plus the closing costs for the home to be purchased.
How to be eligible for a reverse mortgage Info
- You must be a homeowner.
- You must be 62 years old or older.
- You must have a low mortgage balance to be repaid at closing with the proceeds from the reverse loan.
- The house must be your primary residence.
- You must have the financial capacity to pay property taxes and insurance.
- You are required to receive consumer information about a reverse mortgage before obtaining it.
The type of homes that are eligible
- A single family home
- A 2-4-unit home (The borrower must occupy one of the units as the main residence.)
- HUD-approved condominiums
- Manufactured homes that meet the FHA requirements
The major differences between a reverse mortgage and a home equity loan
- A reverse mortgage does not require the borrower to make monthly payments- principal and interest.
- The borrower is expected to pay property taxes, utilities, and insurance premiums.
The amount that can be drawn from the house
The amount that can be received from a reverse mortgage differs from one
borrower to another. However, the amount that can be drawn from the equity in a house depends on:
- Age of the borrower, the youngest among the borrowers, or eligible non-borrowing spouse
- The current rate of interest
- The lower of appraised value or the FHA mortgage limit of $625,500, or the sales price
How to receive the payments
- A single lump sum
- A line of credit
- Monthly payments
- A combination of the above
The reverse mortgage becomes due and payable
- When the borrower sells the home
- When the borrower relocates from the home for a period of 12 consecutive months or moves out permanently
- When the borrower or the last borrower passes on
- When the home falls into poor condition due to the borrower’s inability to maintain and repair the home
- When the borrower cannot pay the mandatory payments such as property taxes, the homeowner’s insurance any longer
Check here to find out if your Condo Is HUD Approved.