|Summary: Is a reverse mortgage right for you? A reverse mortgage my be easier to qualify than a standard mortgage. What should you be looking for in a reverse mortgage?|
A reverse mortgage is the opposite of a forward (standard) mortgage; that is, instead of sending money to a lender you receive money from a lender. If you are over sixty-two and have a home which has accrued equity, you might want to consider a reverse mortgage.
Under the terms of a reverse mortgage, the home still belongs to you and you are responsible for paying taxes and having insurance coverage. You will also be expected to maintain the home to reasonable expectations. The loan amount will be equal to the amount of cash you receive plus any financing fees and interest.
Your loan amount will be capped by the value of your home. Even if you receive money equal to the monetary worth of your house, you are not forced to leave your home under ordinary conditions. When the last borrower on the mortgage dies, when the home is sold or if you move out of the home permanently the amount lent to you must be paid either by you or your heirs.
What are some of the benefits of a reverse mortgage?
Many reverse mortgages are easier to qualify for than standard mortgages are. The lender’s decision is generally based on the homeowner’s age, the equity in the home and the interest rates at the time of the mortgage.
If you have a valuable home but little cash, a reverse mortgage can be a way of obtaining money for repairs and/or taxes and insurance. Money from a reverse mortgage might also come in handy for medical expenses or as a supplement to your retirement income. The money is yours there are no qualifications on its use.
Payments can be structured in a way that is most useful to you. You can receive a lump sum, equal payments for as long as you remain in the residence, equal payments over an agreed term, a line of credit or a combination of different types of payments.
Money received from reverse loans is not subject to taxation. Social security and other benefits payments are usually not affected by reverse mortgage payments but you should check with the proper authorities about your individual circumstances.
What should you look out for when seeking a reverse mortgage?
Make sure your mortgage has a non-recourse clause; this prevents the mortgage amount from outgrowing the value of your home.
Most reverse mortgages have variable rates and every time you receive a payment of any type the amount of your mortgage increases. Keep an eye on the interest rate and the mortgage balance.