Reverse mortgages fall into three categories: Home equity conversion mortgages, Homekeeper reverse mortgages and Private cash account reverse mortgages.
What is a reverse mortgage?
Reverse mortgages have become very popular for senior homeowners. Many seniors today have found a solution to financial difficulties in a reverse mortgage. A reverse mortgage is borrowing funds against the equity in a home, but not making payments on it until the home is sold. The reverse mortgage is paid back after the home is sold, the owner moves out permanently or dies. The lender then receives the principal that was borrowed plus the interest over the time of the loan. This type of loan helps elderly homeowners through challenging financial times as well as long-term care. The homeowner or one who inherits from the homeowner keeps any proceeds from the home selling in excess to what was owed to the lender. To qualify for a reverse mortgage, one must own a home and be at least 62 years of age. The mortgage must be fully or almost paid off. Typically, the amount borrowed depends on the home’s value, equity amount and the age of the applicant.
Different types of reverse mortgages
~Home equity conversions mortgages. This loan is guaranteed by the Federal Housing Authority and HUD. It sometimes includes an appreciating credit line, provides different pay options and a maximum limit.
~Homekeeper reverse mortgage. This loan is a guaranteed Fannie Mae loan that includes a maximum loan amount, but does not provide growing credit limits. The loan many times has lower closing costs than other reverse mortgages.
~Private cash account reverse mortgage. This loan is usually for homes that are worth more than $500,000. The loan provides flexible payment plans and a growing line of credit but many times does have higher closing costs.
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