Reverse mortgages may be an option for people who want to convert part of their equity in their principal residence into cash that can be used as retirement income. There are pros and cons to reverse loans, and not all people will like them. Before you apply for a reverse mortgage loan, it is important to thoroughly research the matter and get as much information as possible. Before making a final decision, you need to be informed and get as much advice and information as possible about them.
To apply for a Reverse Mortgage Pros loan, the home owner must be at least 62 years old. These loans enable you to convert part of your equity in your home into cash. You can get a loan in the form of a line credit that you can draw on when you need it or a monthly fixed payment. You will always retain ownership of your home. You don’t have to repay the loan until you sell your home, move to another area or die. A reverse mortgage is a better option than a traditional home equity loan because there are no monthly payments that must be made to the HECM lender. The reverse mortgage proceeds must be used to pay any current mortgages on the property. There can only be one mortgage on the house. You will have less money, but it will also reduce the monthly payments that you are making and lower your expenses.
The total amount owed by the lender at the end of a reverse mortgage loan is the amount you have received in cash, either as a lump sum, or monthly payments. This includes any interest accrued on the loan. The maximum amount that a HECM lender can loan you is determined by the Federal Housing Authority in the USA. The amount you can borrow depends on the current value of your home, the interest rates and the age of the homeowner. Fixed rate HECMs have a fixed interest rate that never changes throughout the loan term. The amount of payments made to the borrower over the term of the loan will be the same. A HECM that has an adjustable rate will have varying monthly payments. These payments are affected by the interest rates at the time the payment is made. These fluctuating payments will rise if the interest rate drops, and decrease if interest rates rise at the time.
HECM loans are available for all types of properties. Some residences may not be eligible for a loan, while others will need to meet special criteria. Acceptance of a residence is contingent on compliance with the FHA’s property standards and flood requirements. A residence must contain 1 to 4 units and the borrower must live in one of them. A single-family home, a condo home approved by HUD or a manufactured home that is approved under the FHA are all acceptable to qualify.
HUD counseling classes are required for home owners. They provide some protection and guidance to senior citizens. Counselors are not allowed to sell anything, and they only provide information.
The reverse mortgage loan is applied against the equity of the homeowner and is the only guarantee that the lender has. All HECM borrowers must have sufficient mortgage insurance to cover the loan costs. This is not covered by the sale. The HECM lender does not require the borrower’s income or credit details. He will still be paid.
A reverse mortgage is a great option if you own your house and are 62 years old or older and you want to unlock your home equity for retirement. However, you need to be aware of all aspects and the pros and cons.