Please enjoy this contributed post.
If you are looking for reverse mortgage information, you have come to the right place. We all know that there are plenty of different types of mortgages. There are regular mortgages, than second mortgages, and then you also have the reverse mortgages. It can all get quite confusing to know which one is the right one for you.
Today we are going to talk about reverse mortgages.
A Few Basics
What is a reverse mortgage? Reverse mortgages differ from other types of mortgages in that they are loans that do not need to be repaid for the life of the borrower. It basically allows someone to take a part of the equity they have in a home and convert it into cash. Basically, the equity that someone builds up through the years by making regular mortgage payments can be paid out to the borrower.
One of the requirements for someone to take out a reverse mortgage is that they need to be at least 62 years old. If you are in love with your home now, just think how much you will love it in your dotage.
A Few More Requirements
Some of the other requirements for getting a reverse mortgage include:
- The reverse mortgage has to be the only lien on the property.
- If there is an existing mortgage on the property, it has to be paid off using the reverse mortgage.
- A home that is used for a reverse mortgage has to be the primary residence.
- Even though reverse mortgages don’t require the borrower to make any type of repayment on the loan, all of the real estate taxes must be kept current.
- Any Homeowner’s Association fees and homeowner’s insurance also has to be kept current.
- The property that the reverse mortgage is taken out on has to be kept in good condition.
Features of a Reverse Mortgage
Some of the other features of a reverse mortgage include:
- During the first year of the loan, only 60% of it may be accessed.
- During the 13th month, the borrower can get as much of it as they would like.
Some of the features can also be looked at as a disadvantage. These include:
- Interest rates can be high.
- So can upfront fees.
- Heirs may not end up with the home. This is because the loan is repaid when the home is sold. If the borrower dies, the loan will be repaid by selling the home.
What Types of Homes can be Eligible?
In order to be eligible for this type of mortgage, your home needs to be what is known as a single family home. It can also be a home in a 2 – 4 unit building that has one unit occupied by the person taking out the loan.
What is the Difference Between a Home Equity Loan and a Reverse Mortgage?
With a home equity mortgage, or second mortgage, you have to make monthly payments on both the interest and the principle. Reverse mortgages pay you. You do not need to make any payments on the interest or the principle. All you are required to pay for are the utilities, taxes and insurance.
Reverse mortgages are great for dealing with unexpected retirement as well as other issues. Reverse mortgages might be relatively new and not yet widely used, but they can be a great tool for people looking to be secure in their retirement. You can find comprehensive information about them online and you can even find reverse mortgage calculators. Like any financial decision, if you are considering doing this, you need to weigh all of your options first.
Have you ever considered a reverse mortgage? Why or why not?
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. He blogs at Debt Discipline.