Oftentimes when people hear “reverse mortgage” their thoughts turn negative. But for some, reverse mortgages can be an excellent choice. Here are the top seven things I think you need to know about reverse mortgages in order to make an educated decision.
- What is a reverse mortgage?
A reverse mortgage is a special loan on your home that allows you to convert some of the equity in your home into cash. This comes as payments to you. As a borrower, you do not have to repay the mortgage loan until the home is no longer your primary residence.
- There are three types of reverse mortgages.
The three types of mortgages are:
Read more about each at the links I’ve provided.
- Who qualifies for a reverse mortgage?
Seniors age 62 and up are eligible for reverse mortgages. You must own your home outright or have a low mortgage balance that you can pay off at closing from the proceeds of the reverse mortgage loan. You must also prove that you are able to pay the annual property charges on your home, including taxes and insurance. And finally, you must live in the home for which you’re applying for the reverse mortgage.
- Are all homes eligible for reverse mortgages?
As long as you meet the requirement listed above, you can get some types of reverse mortgages on all dwellings. For the HUD HECM program, you must own a single-family home or a two- to four-unit dwelling, where the borrower resides in one of the units.
- Is a reverse mortgage like a home equity loan?
While both involve the equity on your home, they work quite differently. When you take out a home equity loan, you must make monthly payments with interest to the lender. With a reverse mortgage, the payments come to you, and you are only responsible for paying taxes, homeowners association fees and insurance.
- How much money can I get from a reverse mortgage?
These amounts vary by types of mortgages and companies. Private companies set their own rules for proprietary mortgages. For single-purpose, you’re taking out money for a single purpose like home repairs, and the rules also vary from agency to agency. For the HECM reverse mortgages, the amount of the loan is based on the age of the youngest borrower, current rates, the initial mortgage insurance premium payable and a financial assessment of the borrowers.
- How do I chose a lender?
You need to do your homework when choosing a lender, because costs can vary greatly. Shop around and research rates and fees, as well as the payment options, for several lenders before deciding. Decide what type of loan you’re looking for and find lenders who specialize in that area.
When you take the time to be an informed and educated consumer, you just might find that a reverse mortgage is exactly what you are looking for.
And if you’re not ready for a reverse mortgage but are seeking a mortgage on a new home in Gainesville, Manassas or Haymarket, contact me! I would love to help you in your search.
Looking to buy or sell a home in Gainesville, Haymarket and Manassas? Call Realtor® Marcia Goodman at Samson Properties at 703-819-4776.