If you are 62 years or older you may qualify for a reverse mortgage loan. What is a reverse mortgage loan? Reverse mortgages allow a homeowner to take part of the equity that they have in their home and convert it into cash. Reverse mortgages were first introduced so that retirees with a limited income would have a means of utilizing the built-up equity in their homes to cover a variety of costs as they grow old. Some of these costs could include healthcare, children education fees, monthly living expenses, and so forth. There are no restrictions on how the proceeds can be used.
It is called a reverse mortgage because it is a type of loan where the lender pays the borrower. This is just the opposite of a traditional mortgage where the borrower pays a monthly fee to the lender. The money received for this type of loan is not paid back until the home is either vacated or sold. If the borrower continues to stay in their home then he/she does not need to pay any monthly pay backs towards the reverse mortgage loan. The borrower however must keep up all applicable costs such as property taxes, association dues, and homeowner’s insurance.
Some of the borrowers responsibilities and requirements are age qualification, occupancy requirements, taxes and insurance, primary lien, property conditions, and property estate requirements. As mentioned previously, an owner must be 62 years old and if his or her spouse is under 62 years old then the load officer will require additional information before granting eligibility.
A vacation home or investor property will not qualify for a reverse mortgage. The home must be the owner’s primary residence. The property will also need to be in good condition and it will be the responsibility of the borrower to complete any mandatory maintaining or repairs. The reverse mortgage will be the only primary lien on the home. If there is an existing mortgage on the home then it must be paid off from the proceeds of a reverse mortgage.
The total amount of money that a homeowner can borrow will depend on a few criteria such as the title owner’s age, the age of the younger spouse, the home’s value, upfront costs, and interest rates. The older a homeowner is, the more money she or he may receive.
There will be a limit on the amount of funds that a homeowner can access in the first 12 months after the closing of the mortgage. For example, if a homeowner borrows $100,000 for a reverse mortgage then they will not be able to access more than 60% or $60,000 within the first 12 months. After the 13th month, they can take as much as they want of the remaining proceeds.
A lender will conduct a financial assessment for a reverse mortgage. The lender will confirm that the homeowner can afford to continue living on the property while at the same time paying any future insurance costs and property taxes. The lender will look at various incomes that the homeowner receives such as investments, pensions, and Social Security. There is no question that a reverse mortgage is a good idea for an older homeowner that needs some extra financial help in the Golden Years.