A reverse mortgage allows someone, at least 62 years old, to access some of their home equity without incurring a monthly repayment, for as long as they live in their home. All unpaid interest accrues and property taxes and home insurance must still be paid, along with maintaining the property. The loan is not repaid until the borrower no longer occupies their home as a primary residence. At that time, the borrowed funds, plus accrued interest, is repaid, while the remaining equity is left to the owners. To qualify, they must own and live in, a property as their primary residence. There are no income, or asset requirements, however there may be some credit requirements. The proceeds from a reverse mortgage are tax-free and available; as a lump sum, monthly payments, a line of credit; or any combination. Money can be used for any purpose.
The loan amount that someone will initially qualify depends on the youngest borrower's age, the reverse mortgage program chosen, the value of the home (within limits), and current interest rates. Basically, the older someone is and the higher the home value, the larger the reverse mortgage. The reverse mortgage must first refinance all outstanding liens against the property before additional funds can be withdrawn.
Closing costs are financed within the mortgage balance.
A credit counseling session with a HUD-approved counselor is required for anyone applying for a reverse mortgage.
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Top 5 Misconceptions
About A Reverse Mortgage
In the minds of many senior homeowners today, there still remain misunderstandings and continued misgivings surrounding reverse mortgage loan programs. The Department of Housing and Urban Development (HUD) who oversees the Federal Housing Administration (FHA) who insures all lenders of Reverse Mortgage Loans has recently enacted guidelines on all Reverse Mortgages making the product safer and more secure than ever before.
Misconceptions About Reverse Mortgages