Posts Tagged ‘reverse mortgage’

How Does a Reverse Mortgage Work?

More and more people are looking into reverse mortgages. With the very hard economic times Americans have been suffering through, they are looking at every means possible to come up with the money needed to meet their monthly expenses. Is a reverse mortgage the answer to your financial needs, and how do reverse mortgages work?

In order to qualify for a reverse mortgage you must be age 62 or older, and own your home. There must be equity in your home in order to apply for reverse mortgages. As with any traditional mortgage, it’s important to do your research and be completely sure that the reverse mortgage is right for you and your family. You will need to research the financial institutes and be sure you are working with a reputable company.

With a traditional mortgage, the homeowner pays the monthly payment which decreases the balance of the loan, and increases the equity in your home. With reverse mortgages, you can take the equity of your home and receive either monthly payments, a lump sum payout, or withdraw cash as needed. The homeowner continues to own their home and live in it. The amount of cash received cannot go over the amount of equity in your home.

This kind of mortgage is different from a home equity loan. With a home equity loan, a monthly payment is made each month during the life of the loan. With reverse mortgages there is no payment on the mortgage until the owner of the property either dies or sells the home. Interest does accrue and is added to the amount of the reverse mortgage.

The amount of the reverse mortgage you qualify to apply for depends on the age of the applicant, the greater your age, the more money you are eligible for. The equity in your home is also a deciding factor in how much money you’re eligible to apply for. There are also closing costs that will have to be paid. The amount depends on the type of reverse mortgage you go for. There are also fees associated with a reverse mortgage, but can usually be rolled into the reverse mortgage.

The owner of the property is required to keep the insurance current, and continue to pay all of the property taxes. They are also required to continue the upkeep and maintain and make repairs to the property.

There are a couple different kinds of reverse mortgages available. As mentioned above, you will want to research all the types available and whether they are offered by the government or offered by private institutes.

Before you apply for a reverse mortgage, remember to do your research, and discuss this with your family. This may be a viable option for you to help you get through your senior years or it may not be the right road. There are lots of counseling groups out there that can help you decide if a reverse mortgage is right for you and your family.