What is a Reverse Mortgage?
Reverse mortgages were designed to enable homeowners over the age of 62 (seniors by definition) to turn some of the equity left on their mortgage into tax-free cash. Whereas with a regular home mortgage the person who is buying the home has to make monthly payments to a particular lender, with a reverse mortgage the lender is actually the one giving money to you. If you are interested in learning more about reverse mortgages and whether or not you can get one, here is some additional information that you might find useful.
How do I pay back the loan?
So, the idea sounds good, right? However, chances are you are wondering exactly how do you pay off a reverse mortgage? Reverse mortgages are paid off when the borrower passes away, permanently moves out of the house, or sells the house. Additionally, the amount of money that you owe to the lender can never go over the total value of your home, and if you sell your home at a price higher than the amount borrowed for a reverse mortgage you will get the difference back.
Will my home qualify for a reverse mortgage?
Reverse mortgages are currently available for condominiums, townhouses, manufactured houses (after 1976), and single family homes. As such, chances are that your house does qualify, unless it happens to not be included within any of the above-mentioned categories.
How much money can I get from a reverse mortgage?
The amount of money you can expect to receive from a reverse mortgage will depend on a variety of factors, including interest rates on your current mortgage, the amount of money left to be paid, and the appraised value of your home. One point to remember is that in most cases, the less money you have to pay, the older you are, and the more valuable your home is - the more money you can expect to receive through a reverse mortgage.
Are there any particular requirements I should keep in mind?
If you are over the age of 62 years old and you own enough equity in your current home, then chances are you will have no problem qualifying for a reverse mortgage.
What if I still owe money to my mortgage lender?
This will not keep you from obtaining a reverse mortgage. In fact, you can actually use the money you get from a reverse mortgage to pay off your existing mortgage, and still have money left over to keep for yourself. However, in order for this to work you will have to qualify for a big enough loan to cover whatever is left on your first mortgage in its entirety, or you will have to pay off the rest of your first mortgage on your own.
Closing thoughts
A reverse mortgage provides a way for seniors to get money back from their homes in the event that they are in need of some additional retirement funds. There are a variety of different options to look into when it comes to reverse mortgages, and also specialized counseling that can provide you with all of the information and advice you will need when considering whether or not to purchase a reverse mortgage.
