What You Should Know About Reverse Mortgages

Blog, Finance

A reverse mortgage is a type of home equity loan that is designed for older homeowners. This type of mortgage differs from a typical loan because with a reverse mortgage, you don’t need to make monthly mortgage payments. The loan would actually be paid off when you move out or when you die. This is a great option for homeowners who haven’t saved enough for their retirement and need more money.

Who is Eligible For a Reverse Mortgage?

  • If you are considering applying for a reverse mortgage, there are certain criteria that you would need to meet.
  • You must be 62 years of age or older.
  • You would need to own your home and it would have to be your primary residence.
  • Your home would need to be a single family home or a multi-family home with up to four units. If you live in a condominium or a manufactured home, you would be able to get a reverse mortgage as long as you get prior approval.
  • Your home is paid off or you own very little on it.
  • The home must be in good condition to qualify for the loan.

How Much Can I Get From a Reverse Mortgage?
The amount of money that you are allowed to receive would depend on the amount that your home is worth based on its appraised value and the amount of money that you still owe on your mortgage. For example, If you own a home that is worth $400,000 and you still owe $100,000 on your current mortgage, you would have $300,000 in home equity that you can take out in the form of a reverse mortgage.

There are a few other factors involved when it comes to the amount of money that you can get from the loan. The older you are, the more money you can get. For example, a person who is 82 years old would be eligible for more money than a person who is 62 years old. Also, the interest rates would also be a factor. If the current interest rates are at 4 percent, you would be able to borrow more than if the rates were 6 percent.

How Can I Get the Money From My Loan?

  • When you reverse loan application is approved, there are a few ways that you can get the money.
  • When the loan closes, you can get the money in one lump sum.
  • You can receive a monthly annuity, also known as a tenure annuity as long as you are living in the house.
  • You would get a monthly annuity for a period of time decided by you. This is called a term annuity.
  • You can take out a line of credit that can be used how you see fit. As time goes on, the credit line would grow.

Reverse mortgages are a great way for seniors to get the cash that they need to enjoy their retirement. As long as you didn’t plan to pass your house down to relatives after you die, this is one of the best financial options.

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