If you watch TV at all you’ve likely seen the commercials about reverse mortgage at one time or another. What is a reverse mortgage? It’s a loan against your property. However, unlike a regular mortgage that you would make payments to the lender, the lender is paying you. The repayment of this mortgage takes place after you no longer live in your home. Here are some things you should know about reverse mortgages.
* How can a reverse mortgage benefit me? You can use the payments of this loan for any purpose you want. This loan is not subject to tax and can be used for bills, travel, or home improvements, etc.
* Who qualifies? You must 62 years or older, own your home and use it as your primary residence. Any outstanding mortgage, taxes, insurance, etc., must be paid in full by the closing of your reverse mortgage loan.
* Reverse mortgage process. You will need to meet with a “free” reverse mortgage consultant and a HUD-approved counselor to ensure you understand how the loan works. After you submit your application to the lender, your home will be appraised.
* How long is the process? Once all the documents are in order and the loan is approved and signed, funds will be available to you. A typical loan should be done in less than two months.
* How much money will I receive? The amount of your loan proceeds will depend on you and your spouse's ages and the value of the equity in your home.
* Out of pocket expenses. You should never pay anyone a fee to apply for a reverse mortgage, not beforehand and not at closing. Your only out of pocket expense is for the property appraisal. All other fees can be paid for out of the loan proceeds.
* No required loan payments. However, you are required to keep current the home insurance and property taxes as well as any home repairs.
* Regular vs. reverse mortgage? Unlike a regular mortgage, the reverse mortgage has no monthly principal and interest payments. There are no credit scores or income requirements to secure this loan. And at the end of the loan, you are not liable for any loan amount over the value of the home.
* Will you have to pay this loan back? As long as you meet the contract terms, nothing is due until you no longer live in the home. The home can then be sold and any money in excess of what the lender has coming is refunded to you or your estate. If the sales proceeds do not pay the lender in full, you are not required to pay the difference.
* Is a reverse mortgage is a good idea? Reverse mortgages are not for everyone. Your counselor will inform you of all the pluses and minuses. You should have enough information at that time to make a knowledgeable decision. You should compare all aspects of the reverse mortgage against a conventional home equity loan.
For more tips contact our office at 866-497-9761 to schedule an appointment with our advisors.