Reverse Mortgage Loans
Why Reverse Mortgage Loan Product?
The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds can be used.
The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.
The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance and homeowners association dues (if applicable).
"A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash."
What us a Single-purpose Reverse Mortgage?
Single-purpose reverse mortgages are the least expensive option. They’re offered by some state and local government agencies, as well as non-profit organizations, but they’re not available everywhere. These loans may be used for only one purpose, which the lender specifies. For example, the lender might say the loan may be used only to pay for home repairs, improvements, or property taxes. Most homeowners with low or moderate income can qualify for these loans.
What are the Features of Reverse Mortgages?
With a reverse mortgage, the borrower always retains title or ownership of the home. The lender never, at any point, owns the home even after the last surviving spouse permanently vacates the property.
The amount of funds that a borrower is eligible for depends on the person’s age (or age of the youngest spouse in the cast of couples), home value, interest rates and upfront costs. The older someone is, the more proceeds he or she may receive.
What are the Other Types of Reverse Mortgages?
Proprietary reverse mortgages are private loans that are backed by the companies that develop them. If you own a higher-valued home, you may get a bigger loan advance from a proprietary reverse mortgage. So if your home has a higher appraised value and you have a small mortgage, you might qualify for more funds.
Home Equity Conversion Mortgages (HECMs) are federally-insured reverse mortgages and are backed by the U. S. Department of Housing and Urban Development (HUD). HECM loans can be used for any purpose.
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