With a traditional mortgage/forward mortgage, (this is used to purchase a home), you make regular monthly payment until the loan is paid off. Now the process is reversed from when you bought your home. Reverse mortgage allows you the homeowner to use the equity in your home for income. Without having to be credit worth to receive this loan.
How do I qualify for a Reverse Mortgage?
Applicant must:
1)Must be at least 62 years of age.
2)Have equity in their property.
3)Have a home, “mobile-homes” do not qualify.
4)Seek free financial counseling from a source that is approved by the Department of Housing and Urban Development (HUD). The counseling is a safeguard for the borrower and his/her family, to make sure the borrower completely understands what a reverse mortgage is and how one is obtained.
How is the Income Amount determined for a Reverse Mortgage pay?
The amount of money that an individual homeowner can receive from a reverse mortgage depends on his or her age, the Federal Housing Administration (FHA) or Fannie Mae (FNMA) appraised value of the home, and the starting interest rate (effective upon closing/finalization of the loan).
Does Reverse Mortgage have payment options?
Yes, the Applicant can receive payment in these options:
1)Lump Sum
2)Monthly payment advances.
3)Increasing line of credit.
What is the Cost of a Reverse Mortgage?
The most poplar types of reverse mortgage in the U.S., the FHA- insured Home Equity Conversion Mortgage (HECM), the insurance premium charges 2% of the loan and a 2% origination fee in addition normal closing cost. In all of these cases, the costs of a reverse mortgage can typically be financed with the proceeds of the loan itself, with the costs and fees being rolled directly into the principal balance of the loan, rather than paid by the borrower in cash.
Does Reverse Mortgage Offer fix interest rates?
No, generally the interest rates on reverse mortgage are Adjustable Rate Mortgages (ARMs). Reverse mortgages have no fixed duration, typically there are no reverse mortgages with fixed interest rates; although their has been new mortgage programs with fixed interest rates.
When does a Reverse Mortgage end? When the last surviving borrower dies, sells the home, or permanently moves away. "Permanently" generally means you have not lived in your home for 12 months in a row.
You might also have to pay it back if you fail to pay your property taxes, fail to keep up your homeowner's insurance, or let your home go to waste. But if you do, the lender may be able to make extra cash advances to cover these expenses.
Just remember, reverse mortgage borrowers are still homeowners and therefore are still responsible for taxes, insurance, and upkeep.
How much is paid back for a Reverse Mortgage?
The total amount you will owe at the end of the loan (your "loan balance") equals
all the cash advances you've received (including any that were used to pay loan fees or costs)
plus all the interest on them
What is the most you can owe for a Reverse Mortgage?
You can never owe more than the value of the home at the time the loan is repaid. Reverse mortgages are generally "nonrecourse" loans, which means that in seeking repayment the lender does not have recourse to anything other than your home. Not your income, your other assets, or your heirs.
So even if you receive monthly loan advances until you are aged 115, your home declines in value between now and then, and the total of monthly advances becomes greater than your home's value - you can still never owe more than the value of your home. If you or your heirs sell your home in order to pay off the loan, the debt is generally limited by the net proceeds from the sale of your home.
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