Reverse Mortgage Loans

Reverse Mortgage: The Rundown

Reverse mortgage loans allow homeowners 62 or older to turn some of their home’s equity into instant cash without requiring them to pay extra bills or sell their homes. Instead of making monthly payments, you’ll receive a payment each month.

How Reverse Mortgage Loans Work

How large of a reverse loan you’ll qualify for depends on multiple factors, including:

• Your age
• Your home’s value
• Your loan interest rate

 

You’ll receive more money the older you are and the greater your home’s value. You won’t have to repay the loan until you pass away, move away, or sell the house. If you pass away and have heirs, they’ll receive whatever equity remains following the sale of your home.

Advantages of Reverse Mortgage Loans

Reverse mortgage loans found through reverse mortgage brokers can provide extra income for retired individuals struggling to stay afloat financially. You can use a reverse loan to cover unanticipated costs or eliminate existing debt.

Reverse mortgage loans found through reverse mortgage brokers can provide extra income for retired individuals struggling to stay afloat financially. You can use a reverse loan to cover unanticipated costs or eliminate existing debt.

A reverse loan may be costlier than a traditional home loan due to higher interest rates and fees. Another drawback of a reverse mortgage is that it will decrease how much equity you have in your home, so you may not be able to leave your heirs an inheritance.

Keep in mind that you’ll also have to continue paying for home repairs, property taxes, and homeowner’s insurance after securing a reverse loan. If you don’t keep up with these expenses, the lender will demand loan repayment in full, which means you’ll have no choice but to sell your house.

Property Requirements

You’re eligible for a reverse loan if you have any of the below-listed types of properties and it meets the Federal Housing Administration’s (FHA’s) flood and property requirements:

• A single-family house or a home with two to four units, with you occupying one of the units
• A condo project approved by HUD
• An individual condo unit that meets FHA’s requirements for single units
• An FHA-compliant manufactured home

 

Financial Requirements

A lender will verify your credit history, assets, income, and living expenses each month as part of the reverse mortgage application process. They’ll also make sure you have consistently paid your flood and hazard insurance premiums and property taxes on time.

Payment Plans

Let’s say you opt for an adjustable-rate reverse mortgage. You may choose one of several payment plans for these reverse mortgage loans:

• Tenure: the same payment every month
• Term: the same monthly payment for a selected period
• Line of Credit: installment or unscheduled payments until you exhaust your line of credit (you have the flexibility to choose how much you pay and when you pay)
• Modified Tenure: the benefits of both scheduled payments and a line of credit
• Modified Term: the benefits of both monthly payments and a line of credit for a selected period

 

If you choose a fixed-rate reverse mortgage, you’ll be enrolled in a single disbursement payment plan, where you receive your cash in a lump sum at closing.

How Your Mortgage Amount Is Determined

How much you borrow for a reverse loan will depend on multiple variables, including the following:

• How old the qualifying non-borrowing husband/wife or youngest borrower
• Current rate of interest
• Whichever of the following is lowest:
  • Home’s appraised value
  • $970,800 — the maximum reverse mortgage limit

 

Work with Summit Lending Today

At Summit Lending, one of the leading reverse mortgage brokers, we’re passionate about putting our clients first. Whether you want to buy a home, build one, refinance your home, or tap into your existing home’s equity, our home loan specialists can help. Contact us today!

*Summit Lending isn’t endorsed by or affiliated with the U.S. government, USDA, VA, or FHA.