Title:
Is A Reverse
Mortgage Right For You?
Word Count:
541
Summary:
In the last few
years reverse mortgages have been growing in popularity among the elderly.
While there are numerous advantages associated with reverse mortgages there are
also disadvantages as well. Before you take out a reverse mortgage, be sure you
have the whole story.
Keywords:
loans, mortgage,
reverse, secured, home, house, interest, debt, repayment,,apr, loan
Article Body:
In the last few
years reverse mortgages have been growing in popularity among the elderly.
While there are numerous advantages associated with reverse mortgages there are
also disadvantages as well. Before you take out a reverse mortgage, be sure you
have the whole story.
First, understand what is involved in a reverse mortgage. Basically, this type
of mortgage allows you to transfer a portion of your equity into cash without
the need to take on an additional monthly bill, as is the case with a regular
home equity loan, or sell your home. With a reverse home mortgage, unlike a
regular mortgage, you receive money for the equity in your home and are not
obligated to pay it back until you are no longer living in your home. It should
be understood that the money will need to be paid back; either when you sell
your home, move to another principal residence or die. In the event that you
have a lot of equity in your home but you’re having difficulty meeting your
monthly financial obligations, this can be a good option. Other advantages
include the fact that the money you receive from the reverse mortgage is
typically tax-free because it will have to be repaid. In addition, depending on
which lender you choose, there are typically no income restrictions.
There are regulations in order to qualify for a reverse mortgage. You must be
at least 62 years of age and live in the home as your principal residence.
There are three basic types of reverse mortgages. These mortgages are
single-purpose reverse mortgages, federally-insured reverse mortgages that are also
known as Home Equity Conversion Mortgages or HECMs and proprietary reverse
mortgages.
Single purpose reverse mortgages are offered by state and local government
agencies as well as some non-profit organizations. One of the major advantages
to this type of reverse mortgage is that it will not generally have high costs.
Unfortunately, their availability is limited depending on where you live. In
addition, there may be regulations specified by the lender regarding what you
can use the proceeds of the loan for. The most common purposes include property
taxes and home repairs and improvements. This type of loan may also have income
restrictions; meaning you can’t make more than a certain amount of money in
order to qualify.
A HECM will generally have higher cost than a single purpose mortgage and those
costs are usually up front. On the flip side, they are more widely available
and typically do not have income requirements. In addition, there are no
purpose limitations. Because HECMs are backed by HUD you will be required to
meet with a counselor from a housing counseling agency who will explain all the
details regarding the loan to you. The amount of money you can borrow using a
HECM will depend on your age, the value of your home, where you live and current
interest rates. This type of loan can be quite flexible; providing options such
as a line of credit as well as fixed monthly payments.
Because proprietary reverse mortgages are backed by private loan companies, the
options with this type of loan can vary. Usually this type of loan will have a
higher cost than a HECM.