A reverse mortgage is a mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments.
There are two types of reverse mortgages – the conventional and the non-conventional. Depending on the size of the loan, you should decide which one will best suit your needs.
While a conventional mortgage has monthly payments, a reverse mortgage has no payments. The monthly interest is calculated based on the amount of the principle you receive each month and the interest that was previously assessed on the loan. This method of repayment can balloon quickly and consume the entire equity in a home.
How much money do you get from a reverse mortgage?
The amount of money you can borrow depends on how much home equity you have available. You typically cannot use more than 80% of your home’s equity based on its appraised value. As of 2018, the maximum amount anyone can be paid from a reverse mortgage is $679,650. However, most people will be paid much less.
What happens at the end of a reverse mortgage?
A reverse mortgage usually ends in one of three ways: either the homeowners die; they sell their property and move away, or they move into a retirement residence or long-term care. (Defaulting on the loan is another scenario, which we’ll discuss later.)
What are the requirements for a reverse mortgage?
- All borrowers on the home’s title must be at least 62 years old.
- You must live in your home as your primary residence for the life of the reverse mortgage.
- You must own your home outright or have at least 50% equity in your home to be eligible for a reverse mortgage loan.
Who owns the house in a reverse mortgage?
No. When you take out a reverse mortgage loan, the title to your home remains with you. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs). The Federal Housing Administration (FHA), a part of the Department of Housing and Urban Development (HUD), insures HECMs.
Can you lose your house with a reverse mortgage?
The answer is yes, you can lose your home with a reverse mortgage. However, there are only specific situations where this may occur: You no longer live in your home as your primary residence. You move or sell your home.
Can you pay back a reverse mortgage early?
A reverse mortgage can be paid off early by refinancing it with a traditional loan or paying the difference between how much was borrowed and how much is owed on the home. The borrower may also make monthly payments, which will shorten how long they have left in their life before getting a HECM.
How long does it take to get a reverse mortgage?
About 30-45 days. A reverse mortgage application process generally takes about 30-45 days from start to finish and has five major steps. However, the longest part of the reverse mortgage loan process is the decision-making process that leads up to the application.
Who benefits most from a reverse mortgage?
A reverse mortgage works best for someone who owes little or nothing on the original mortgage and plans to live in the home for more than five years. “Do your research, shop around, and talk with a federally approved housing counselor,” Jason Adler, of the Federal Trade Commission, said.