Top Questions to Ask About Reverse Mortgages
You may be wondering “What is a reverse mortgage?” With this type of financial arrangement, seniors remain in their home and receive supplementary income through a home loan. A reverse mortgage is commonly referred to as a home equity conversion mortgage.
In order to qualify, homeowners must be at least 62 and have equity in the home. The equity is used to provide extra retirement income for the senior. Seniors can eliminate their monthly mortgage but must still commit to paying taxes and insurance on the property.
What is a reverse mortgage best suited for?
The reverse mortgage option may not be for everyone. It is ideal for people who can afford the cost of maintaining their property. These seniors shouldn’t be planning on moving anytime soon. It is best for those who need additional cash flow while still living in their current home.
What kind of properties are eligible?
There are only a few types of properties that qualify for reverse mortgages. The property must be a single-family home, condominium, townhome, or multifamily dwelling with two to four units. The standards for these properties must satisfy property standards established by the FHA.
When does the loan get repaid?
The borrower does not have to pay back the loan until they move out. The loan requires that no monthly payments be made toward the balance. If the owner continues to live in the property while paying insurance and taxes, no payments are ever required of the homeowner.
How much can money can you receive?
The amount borrowed depends on the age of the applicant. If a couple is applying for a mortgage together, the youngest applicant’s age is used. Either the appraised value of the home or the Federal Housing Administration’s designated mortgage limit of $636,150 is used to determine the loan amount.
How are the disbursements structured?
Payments can be paid out in several ways. Equal monthly payments can be disbursed for a fixed term for as long as the person continues to reside in the property. A line of credit can be established where unscheduled installments are made until no more credit is left. A combination of credit and scheduled monthly payments can be used to disburse funds for as long as the person remains in the home.
The loan is available for homeowners who want to continue to reside in their primary residence. Payments can be made out in a variety of formats. The homeowner is responsible for paying insurance and taxes, but no payments are required. A reverse mortgage is a viable option for seniors who want to supplement their cash flow.