A reverse mortgage is a way for older homeowners to earn money for home improvement or to pay off a current mortgage. Reverse mortgages are also a great way for retired individuals to supplement their retirement income, and pay for healthcare expenses. Essentially, a reverse mortgage allows a homeowner too convert part of the equity in their homes into cash without having to sell their house. A great benefit of a reverse mortgage is the fact that it doesn't involve any more bills or debts.
A regular mortgage is where you make monthly payments to a lender. A reverse mortgage workers the other way around, you receive money from the lender and don't able to pay it back while you love in your home. This may sound too good to be true, but the lender benefits from the transaction. Individuals who choose to take out a reverse mortgage must repay the lender when they die, sell the home, or no longer use the home as a principal residence. A lot of times, individuals can simply pay the lender back by forfeiting the house at the end of their life.
Reverse mortgages are a practical choice for older Americans that have a stunning home but are cash-poor and would like to meet their financial obligations without actually selling their home. IN order to qualify for a reverse mortgage, you must be at least 62 and live in your home. The proceeds of a reverse mortgage are typically tax-free, and most reverse mortgages don't have any income restrictions.
There are three different types of reverse mortgages. These are single-purpose reverse mortgages, federally-insured reverse mortgages, and proprietary reverse mortgages. First, single-purpose reverse mortgages are an offer that is typically presented by a state or local government agency or a non-profit organization. These mortgages typically have very low costs but they are not available everywhere. They can only be used for one purpose which is specified by the government or the nonprofit lender, so they don't permit a lot of liberty. For example, the lender may declare that the reverse mortgage can only cover home repairs, or can only cover property taxes. You can qualify for these loans only if your income is low or moderate.
A second loan, the federally-insured reverse mortgage, tends to be costlier. These loans are also known as Home Equity Conversion Mortgages, and are backed by the U.S. Department of Housing and Urban Development. The up-front costs to take out one of these reverse mortgages can be more costly and are most expensive if you don't plan to be in your home for a very long time. The HECMS have no income requirements and can be used for any purpose. In order to apply for one of these reverse mortgages, you will be required to meet with a counselor form a government-approved housing counseling agency. The counselor will go over all aspects of the reverse mortgage in detail.
This includes talking about the costs of the loan, the financial implications, and the alternatives. The counselors should tell you about all of the different programs that you may qualify for in addition to your HECM reverse mortgage. The counselor should also let you know if there are any other options for reverse mortgages available in your areas. HECM loans can be paid in a variety of ways, and you will have the right to choose how you prefer to receive your money. You can choose monthly cash advances, or a line of credit. You can also get a combination of these two options.
Proprietary Reverse Mortgages are also often expenses and have no income requirements. You may choose this type of reverse mortgage loan if it fits best with your qualifications based on your age, the appraised value of your home, and the current interests. Also, you may opt for this mortgage choice based on where you live. If are considering a reverse mortgage it is always wise to get an informed real estate lawyer on your side to help you consider your options. Talk to a local real estate attorney today if you want to learn more!