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Reverse Mortgage
The Ins and Outs of Reverse Mortgages
If you or someone you know is considering stepping into a reverse mortgage loan, this article is a must read for both of you. The following contains Reverse Mortgage Information about lenders, Reverse Mortgage Counselors, Reverse Mortgage Rates, Reverse Mortgage Calculators and the HECM Reverse Mortgage.
12 Things You Must Know About Reverse Mortgage Loans
1. What exactly is a Reverse Mortgage?
A Reverse Mortgage Loan is just that, a loan. The value and equity of your home is considered when applying for the loan. Your Reverse Mortgage Rates will not be based on credit rating or history as long as there is enough equity to cover the Reverse Mortgage Loan. They are only available to seniors age 62 or older through Reverse Mortgage Lenders. The HECM Reverse Mortgage is the only federally insured form of these loans.
2. How much will I be eligible for?
The amount of money received in Reverse Mortgages can be calculated with a Reverse Mortgage Calculator but depends on a few factors. First, how much is your home worth minus any liens or repairs to be made? Secondly, how old are you? The older you are, the more money you can receive from one of the Reverse Mortgage Lenders. Your lender will also set the Reverse Mortgage Rates of interest based on U.S. Treasury T Bills. Lastly, how you take your money out makes a difference too. Lines of credit allow you to receive more money, the lump sum gives it to you all at once but you will pay higher fees. This is information your Reverse Mortgage Counselor will want to explain to you in detail.
3. Are there any limits to my Reverse Mortgage Loan amount?
There are actually limits to how much money you can receive as part of your loan. The current limit is set at $625,000. This amount was set in 2009 and it does not make a difference if your home is worth far more than that, all applicants must adhere to this limit. This amount can be determined through a Reverse Mortgage Calculator offered by your Reverse Mortgage Lender or your HUD approved Reverse Mortgage Counselor.
4. How can I receive the money?
Once your loan is approved you can receive the funds as a lump sum, line of credit, or even in the form of monthly payments. If you choose to, you could take all of these in some kind of combination. You also continue to hold the title to the home and can remain living there.
5. How and when do I repay the Reverse Mortgage Loan?
This is important Reverse Mortgage Information. The Reverse Mortgages do not have to be repaid until you move out of the home, sell the home, or pass away. Opposite to a traditional mortgage you will not make monthly payments but the interest is added to the lien on your property.
6. What fees are associated with Reverse Mortgages?
Exact costs depend upon the specifics of the loan, but here is a general breakdown. Reverse Mortgage Lenders will charge an origination fee of 2% for the first $200,000 loaned and 1% after that. The maximum amount a Reverse Mortgage Lender can charge for their origination fee is $6000. You will need to pay for an appraisal of the home, possibly a survey of the land, title insurance, title fee, recording fee, and mortgage insurance. The amount of the mortgage insurance is 2% of the appraised value of the home.
7. Are there any other requirements associated with these Reverse Mortgage Loans?
The Department of Housing and Urban Development also requires applicants to attend a session with a Reverse Mortgage Counselor so they can fully understand all the Reverse Mortgage Information. This counseling usually ranges from $100 to $125 but some agencies provide this for free.
8. What happens to my house after I die?
A Reverse Mortgage will pass your home to your heirs after you die, but the amount left on the lien will have to be paid. If your estate does not have enough funds to cover the Reverse Mortgage amount, then willing it to any of your heirs would do no good. You must be careful when considering these loans if you want your heirs to inherit any worth at all.
9. You should not take out a Reverse Mortgage to make other financial investments.
If you are thinking about a Reverse Mortgage so you can invest into something else, think again. When you add up all of the fees and interest you will pay on the Reverse Mortgage itself, you will not have any profit left from your investments. Origination fees and insurance premiums will take around 10% or more of your proceeds plus the interest you are paying.
10. Is there any situation where a Reverse Mortgage is a good idea?
Yes. If you are at least 62 years old, love your home and want to stay, but cannot meet your monthly bills to do so. You must understand that by using the equity to pay your monthly expenses until your death means your home will be sold by either your family to repay the loan balance or by the Reverse Mortgage Lender.
11. Are there similar options besides a Reverse Mortgage if I am in need of cash to survive?
Selling your home and moving to a smaller or more affordable residence is an option for all. Obtaining a Home Equity Line of Credit is yet another choice if the Reverse Mortgage does not sound good to you. If you are seriously considering a Reverse Mortgage, look into the HECM Reverse Mortgages because they are the only type that is insured by the U.S. Federal Government. HECM loans are only available through approved FHA lenders.
12. Overall.
A Reverse Mortgage is a major decision and should be taken as such. You must consider your current situation and your future plans before applying for this type of loan. These loans offer you the ability to sustain your lifestyle until your death but take away from any inheritance you wish to give your surviving family members.
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