Reverse Mortgage Explained

In case you are at least 62 years old and own a home, a reverse mortgage could give you access to your home’s equity without moving or selling your property. It is crucial for you to understand how a reverse mortgage loan works before signing up, as a few kinds of reverse mortgages have disadvantages. This guide will explain the basics of reverse mortgages so you could decide if a reverse mortgage loan is best for you.

How Does A Reverse Mortgage Work

A reverse mortgage allows you to borrow against the equity of your home so you could get the cash without having to sell your house. You could choose whether you want to receive regular payments, a lump sum payout, or perhaps a line of credit that lets you take out the money whenever it’s needed.

You don’t have to pay back your reverse mortgage loan provided that you continue to reside in your house and you don’t need to make payments on the loan. But you just have to keep up with other housing costs like homeowners insurance, property taxes, association dues, and repairs.

If you change your main residence before your death, you have to repay the loan, which might be completed by selling the house. The lender takes into account a change of home to be when you reside outside your property for at least six months in a year for 12 consecutive months for non-medical reasons for medical purposes.

Types of Reverse Mortgages

Home Equity Conversion Mortgage (HECM)

The Home Equity Conversion Mortgage or HECM is the most typical type of reverse mortgage. These types of loans with federal backing and limits on specific fees, however, once you receive your cash, you could spend it however you want.

The U.S. government through the Federal Housing Administration, which is a branch of the Department of Housing and Urban Development, insures this kind of HECMs. If the amount that you owe from the reverse mortgage loan grows more than the home value, the FHA will assume most or all of the loss. You have to cover a mortgage insurance premium to cover this type of possible loss, however, it could be financed into the cost of your loan.

Proprietary Reverse Mortgage

Proprietary Reverse Mortgage are a lot like HECMs, however, they don’t offer a government guarantee. They have less restrictions and the lender could loosen the eligibility requirements like getting rid of the financial review through the help of a HUD counsellor. However, the proprietary reverse mortgage may have fees that are higher than an HECM.

HECM For Purchase

An HECM for purchase could be used to purchase a new house for your primary residence. You get into a contract to purchase your house, pay the down payment, and after that, finance the purchase balance with the reverse mortgage instead of paying cash or using the first lien mortgage. The new house cannot be an investment property or a vacation home.

Single Purpose Reverse Mortgage

In a single purpose reverse mortgage, the lender will provide restrictions on how you could use the cash from a reverse mortgage lender. For instance, it may only be utilized to pay off home repairs or property taxes. These reverse mortgages are usually the most affordable option, however, they are limited in availability. A few local and state governments as well as non-profits provide them, and they’re usually for low as well as moderate income borrowers who might not be eligible for other kinds of reverse mortgage.

The Advantages of Reverse Mortgage

Access to money through payments

Just like a reverse mortgage in Columbia, a home equity loan will borrow against the equity of the home. However, with a home equity loan, you will be able to make mortgage payments per month, which cuts into how much you will have left to spend. You don’t have to make monthly payments if you get a reverse mortgage loan. The loan just has to be repaid if you sell your home, pass away, move out, and it’s typically paid for with the cash form the proceeds of your house. You don’t have to pay the interest or loan balance off before then.

Maintain Your Home Ownership

You are still the homeowner after taking out a reverse mortgage. The reverse mortgage lender does not get the right or the title to sell the house, provided that you keep up with the cost of housing including homeowners insurance and property taxes. The home will stay yours until you move to a new place or pass away. Even if you relocate, you will still have the option to pay off your loan so you can keep off the property.

Flexible Payment Options

There are various ways to borrow through a reverse mortgage loan, which includes taking a lump sum, line of credit, or lifetime payments. You might be able to switch to another payment option during the loan, such as changing the line of credit to lifetime payments. In case you borrow cash from a line of credit, you could pay back the cash and then borrow again in the future.

Social Security and Medicare Will Remain Unaffected

If you get money from a reverse mortgage, it will count as a loan and not as an income. Consequently, your Medicare and Social Security won’t be affected.

Call Reverse Mortgage Specialists if you are interested in getting this type of loan or if you wish to know more about it.

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/