Primarily if you are interested in what are the features of a reverse mortgage are, you should know these facts about a reverse mortgage that apply regardless of which mortgage lender you finally get your reverse mortgage. Keep in mind that to qualify for a reverse mortgage, the home you are living in has to be in your name and not in the name of a relative.

Who owns your home with a reverse mortgage?

With a reverse mortgage, your home is still owned by you and does not belong to the institution from which you got your reverse arranged. That is the most important feature of a reverse mortgage.

Do you make mortgage payments with a reverse mortgage?

For as long as you actually live in your home, your mortgage payments have been satisfied, that means no more mortgage payments need to be made by you to stay in your home. If you want, you can still sell or even refinance your home and all without paying a penalty. None of the money that you receive from your reverse mortgage lender is taxable. There are no restrictions on what you choose to use your money on; it’s your money to do with as you want. These features of a reverse mortgage are attracting many seniors who would like to spend their retirement with a cash flow from their home.

How can you find out if you qualify for a reverse mortgage?

To find out if you qualify for a reverse mortgage, simply call your local bank and speak to one of the customer assistant managers or fill out an application online at any reverse mortgage Internet website. For more information about what some of the features of a reverse mortgage are before making a decision, the National Reverse Mortgage Lenders Association or the NRMLA can be accessed online. To get a list of approved reverse mortgage lenders contract the FHA or the Federal Housing Administration and HUD or the United States Department of Housing and Urban Development.

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There are three types of reverse mortgages, single-purpose reverse mortgage, federally insured reverse mortgage, and proprietary reverse mortgages.

Types of Reverse Mortgages

A single-purpose reverse mortgage is the cheapest option. Its availability is limited, and it can only be used for one purpose, which is defined by the government, or the nonprofit lender. If the lender says that the loan must be used to pay home repair expenses or property taxes, then that is the way that the money from the loan must be spent. Most of the time, any homeowner with a low or moderate income can be qualified to take out this type of loan.

The Next Type

The next type is an HECM and proprietary reverse mortgage; these options are generally the least expensive. However, the upfront costs can be quite expensive. This factor is important to keep in mind, because if you borrow a small amount, or just need to borrow for a little while. HECM loans can be available to almost anyone, and can be used for any purpose.

Get A Loan

Before getting an HECM loan, there are certain requirements that must be met. The borrower must meet with a counselor. The government must approve this counselor. Sometimes lenders that offer proprietary mortgages require counseling. This counselor’s job is to explain implications, and offer alternatives to the HECM loan, like a government or nonprofit loan, or other types of reverse mortgages. These counselors will also assist in comparing costs of other types of reverse mortgages and help identify the effects of fees, other payment options, and other things that may affect the price of the loan. A counselor is legally not allowed to turn a person away if they cannot afford any of the counselor’s fees.

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A mortgage prepayment penalty is a clause written into a mortgage to discourage mortgage holders from refinancing or paying off their loan early.

Are there different forms of prepayment penalty clauses?

Yes, there are hard prepayment penalty clauses and soft prepayment penalty clauses. A hard penalty applies to both a loan refinance and an early payoff. Soft penalties only apply to early payoff. The type of penalty a mortgage has is stated in the prepayment clause.

Why do lenders add a prepayment penalty to their agreements?

Interest income is a mortgage lender’s main source of revenue. Most mortgage originators do not mind a few extra payments. When the borrower pays off more than 20% of the balance in 12 months then the lender’s future income is threatened. For example, a borrower pays off a 30 year mortgage within 10 years, 20 years of anticipated interest income have been diminished. The prepayment penalty makes refinance or prepayment of a recently issued mortgage more expensive and therefore less desirable and cost effective. Most prepayment penalties will decrease or disappear after a certain number of years specified in the prepayment penalty clause.

Do reverse mortgages have these prepayment penalty clauses?

By law, reverse mortgages cannot have any form of a prepayment penalty clause. If for any reason the holder of a reverse mortgage wanted to make a partial or full payment on the loan they can do so at any time.

Why are prepayment penalties allowed on a regular mortgage but not a reverse mortgage?

A prepayment penalty defeats the purpose of a reverse mortgage. It grants homeowners access to equity without any repayment. Most borrowers gain nothing from early payments. They applied for the reverse mortgage to use some of their home equity without selling it or having to make monthly payments

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The answer to the question Is there a choice how I receive my cash from a reverse mortgage? is simply: yes! There are several ways that the mortgagee can receive the cash from a reverse mortgage.

Is There A Choice How I Receive My Cash From A Reverse Mortgage? Why You Need the Money Makes The Choice

Take a lump sum if you want to pay off a large debt, pay for medical bills or pay for long term care insurance. Some borrowers may use a lump sum to purchase an annuity. You must choose a fixed interest rate on a lump sum payout. With a fixed rate, interest is less over the life of the loan.

Other Than a Lump Sum Is There A Choice How I Receive My Cash From a Reverse Mortgage?

Yes, there are several options to the question, Is there a choice of how I receive my cash from a reverse mortgage? By taking an adjustable interest rate the borrower opens up several optons.

What Are The Other Options For: Is There A Choice How I Receive My Cash From A Reverse Mortgage?

The borrower can choose a monthly payment for the life of the last surviving owner. A second choice is a monthly payment for a set period of time such as five years. A third very popular choice is a line of credit. You take money from the line of credit as needed. A line of credit can be combined with set monthly payments. You may also take a lump sum combined with a line of credit. You pay more interest with a variable interest rate.

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The unique benefits available from a reverse mortgage help many retirees fund a comfortable lifestyle. In most situations, borrowers gain access to a line of credit without a corresponding duty to make monthly payments. In one sense, a home begins making payments to homeowners without regard for current income received.

The Reverse Mortgage Approval Process

The current value of a home is a primary consideration for all lenders. In addition, the amount of existing loans, the age of all homeowners, and current interest rates also play a vital role in the approval process. Because no payments are made on a reverse mortgage, current income and FICO scores are not considered during approval. In almost all situations, the current value of a home must be sufficient to repay all existing loans and additionally justify a new line of credit.

Repayment of a reverse mortgage is limited to home value when the last borrower permanently leaves. Because of this unique repayment requirement, lenders evaluate home value carefully. Older applicants who have substantial home equity receive the best interest rates and highest loan approvals. This general rule applies equally to all applicants regardless of credit scores and current incomes.

Repayment Procedure

Payment is due when the last borrower vacates the home. Repayment requires reimbursement of all principal advances and accrued interest from the inception of the loan. In most cases, repayment is delayed until the death of the last remaining spouse.

The estates of borrowers are not liable for repayment. Upon the death of the last remaining occupant, heirs may choose to keep the home and repay all amounts due. Alternatively, heirs may surrender the home in full satisfaction of amounts owed without personal responsibility.

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Many seniors are bombarded with financial advice for their retirement. Reverse Mortgages are on of the choices for retirees who own their own home, but is a reverse mortgage the best option for making use of equity? The answer depends on each individuals circumstance, but here is a quick rundown of the major things to take into account before making a decision:

Reasons to buy a reverse mortgage

The primary advantage to seniors is the ability to take equity out in a lump sum, or monthly payments, while staying in their own home with no monthly mortgage or rent to pay. If the fees are reasonable and the company reputable, this is a way to pull cash out of a home without having to pay interest on a loan, and will allow them to stay in their home for the rest of their lives.

Reasons not to buy a reverse mortgage

If there is illness or injury that a move to assisted living, or they just want to move somewhere else, they no longer have the option of selling the home or borrowing against the equity because the equity has already been pulled out, and the home belongs to the bank.
The fees can be very difficult to understand, and it is hard for most people to be able to compare the relative values of different reverse mortgage offers. There have been reports of dishonest sales people steering seniors to poor value products to get great commissions for themselves, and most people do not know how to evaluate these complex products.

Estate planning

Reverse mortgages ensure that there is no equity left in the home to pass on to loved ones. Many seniors want to pass their home to their family and a reverse mortgage does not allow this option.

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Reverse mortgages are a way that seniors can get additional income to live on to help with their expenses. Is a reverse mortgage a good option for everyone? Not necessarily as there are many requirements that must be met to qualify. If you are a senior and own your own home then this might be an option for you.

Age Requirements

If you are the borrower on record of the reverse mortgage then you must be at least 62 years of age. Anything younger than this and you will not be able to get a loan. If one of you is younger than 62 and you still want the loan then you might consider having just one person on the loan to qualify.

Outstanding Loans

If you still owe any money on your home then you do not qualify. Your home must be free any clear of any outstanding loans before you can apply for a reverse mortgage. If the amount is small enough and you have enough funds to pay it then it might be advantageous for you.

Governmental assistance
If you are currently getting Medicaid, social security payments, or other governmental assistance then a reverse mortgage may not be for you. The payments would be considered liquid funds and might disqualify you for the assistance that you are getting. You might want to inquire about this with a loan specialist to see how this might affect you.

Loan Amounts

If your home is more than the maximum amount allowed for a reverse mortgage you might not want to proceed. The current 2009 limit is $625,000. This is more than the average home value for many people but in areas where the house values are high this might not be a viable option. You will not get the full value of your home. You can still leave the house to your heirs but they will have to refinance your loan before they can claim ownership.

How to choose

As you can see there are many decisions that must be made before you make the leap into a reverse home mortgage. The question of whether or not a reverse home mortgage for everyone can only be determined by you and your needs. If you want more information you should check out no less than 10 companies to get all the facts to pick the best one for you.

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Your heirs may buy it back if they wish, they have approximately twelve months to repay the balance of the loan. Your heirs can sell the house to pay off the reserve mortgage. After the sale, the remaining balance is inherited by the estate. The estate is not liable if it does not sell for enough to pay off the reserve mortgage. Other investments of the estate cannot be sold off the pay the reserve mortgage.

Requirements in a reserve mortgage:

You and your spouse must be at least 62 years old to get a reverse mortgage. The property must be your primary residence and in good repair. The property must meet with goverment guidelines. The property can be a single family residence, a townhouse, a condo or a multiple family home up to four (4) units.

Others things that has to be done with a reserve mortgage:

You will be required to attend a counseling session to make you better understand the terms of your reserve mortgage. In most areas if you are not able to go to the counseling service they will come to your home or you can do it on your computer There are some up front charges but these may be taken out of your proceeds from the mortgage. Your property must appraise for enough to get a reserve mortgage. You may get a reserve mortgage on your home if you have a mortgage on it but the mortgaged amount cannot be more than 65 percent. You must pay the insurance, taxes and maintain your home in good repair.

Postive thing about a reserve mortgage:

there will be no income limit or a credit check. No house payments as long as you and and your spouse live in the property.

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First, you need to understand how reverse mortgages work. If you are struggling to make ends meet, a reverse mortgage could help you pay the bills. A reverse mortgage is like a traditional mortgage, only instead of paying monthly payments to the bank, the bank sends a monthly payment to you. You can use this money for bills, travel, or any other expense.

Qualifying For A Reverse Mortgage

Reverse mortgages are very closely regulated. To qualify for one, you need to be at least sixty-two years of age. Additionally, your home cannot appraise for more than $625,000. If you still owe money on your property, you are not eligible because you still owe the bank money. Only those who have paid the bank back in full can qualify. If you still have a first or second mortgage that has not been paid in full, you will have to find another financial solution to your financial problems. However, there are no credit requirements to qualify. Even if you have bad credit, as long as you meet the other requirements you can still participate in this program.

Discussing Your Decision With Your Family

If you decide that a reverse home loan is right for your situation, you should discuss your decision with your family. They might believe that the bank will automatically take possession of your home after death. This is not the case. The loan becomes due after your death, but if your family repays the amount of the reverse mortgage, they can keep possession of your home. Ultimately, this decision is up to you. If you qualify and need the money, a reverse mortgage can give you the financial freedom necessary to enjoy your retirement.

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When you have a reverse mortgage you are taking money from your equity to use for living expenses. At the time of your death the mortgage company will sell your home to cover the money you owe the mortgage holder. Your family will, at that time, have the ability to repay the reverse mortgage in full if they wish to keep the home.

Will my family pay for my reverse mortgage?

Your family will not have to pay for any monies toward the reverse mortgage unless the sale of the home does not cover the amount that is due. Some, not all, reverse mortgages hold this clause that makes any balance due payable by the heirs. When you apply for a reverse mortgage you should be very aware if this clause is in your contract. For this reason it is always encouraged that you look for a FHA backed reverse mortgage. If you apply for a mortgage through a FHA/HUD authorized broker you can purchase mortgage insurance. This insurance will guarantee that your heirs will not be responsible for any outstanding debt your reverse mortgage may hold.

What happens to my reverse mortgage if I outlive my money?

When you receive a reverse mortgage the amount of money available to you is based on the available equity in your home. If you should outlive the available amount you will be able to still retain your home. At the event of your death the reverse mortgage company will then sell your home to regain their money. Also, during this period you may request a reevaluation of the value of your home. This may allow you to secure more money to live off of during your life time.

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