The Process of a Reverse Mortgage

 

Reverse mortgages—what are they? 

For as long as you continue to reside in the property, the loan from the reverse mortgage does not need to be repaid. 

 

You can receive it all at once, as a set amount every month, or whenever and however you like. 

 

Only upon selling the property, leaving permanently, or passing away are the loan and interest due. 

 

To what end do 'Reverse Mortgages' serve? 

Most don't need to be paid back as long as you continue to live in the house. 

When the last surviving borrower dies, sells the home, or permanently moves away, the loan is fully repaid. 

Due to missed payments, your outstanding balance will continue to increase. You cannot be required to repay more than your home is worth at the time reverse mortgage repayment the loan is paid off. 

Since you still technically own the house, you're responsible for maintaining it and seeing to its upkeep costs and taxes. If you don't pay them, the lender can take that money out of your loan or demand payment from you. 

Qualification for a Reverse Mortgage 

Who Qualify as Homeowners 

The minimum age for a homeownership is 62. 

One of the home's owners must reside there full-time. 

Houses That Qualify 

House for one family only. 

Single-family home with 2–4 units, occupied by the owner. 

Some apartment complexes, PUDs, and mobile homes. 

AVOID: Cooperatives and the vast majority of mobile homes. 

 

What is the Maximum Reverse Mortgage Allowable Amount? 

To get funds from a reverse mortgage, you must: 

 

In one lump sum payment 

Payments received on a monthly basis 

As a revolving line of credit, your spending habits and timing are entirely up to you. 

In any permutation of the preceding 

The amount you get usually depends on your age, your home's value and location, and the cost of the loan. Loans with the lowest interest rates often go to the oldest homeowners who also happen to own the most expensive properties. 

 

Most people get the most money from the Home Equity Conversion Mortgage (HECM), a federally insured program. 

 

Types of Reverse Mortgages 

Loans offered by some states and local governments are often for specific purposes, such as paying for home repairs or property taxes. These are the lowest cost reverse mortgages. 

Loans offered by some banks and mortgage companies can be used for any purpose. 

Costs for Reverse Mortgages 

The costs for loans from banks and mortgage companies usually include the following: 

 

Application fee 

Insurance 

Origination fee 

Monthly service fee 

Closing costs 

Interest 

These costs are usually added to the loan balance (what you owe). 

 

Loans are almost always the least expensive reverse mortgage you can get from a bank or mortgage company, and in many cases are significantly less costly than other reverse mortgages. 

 

Reverse mortgages are most expensive in the early years of the loan and generally become less costly over time. 

 

Before getting a reverse mortgage other than a government, carefully consider how much more it will cost you.