10 Top Faq About How Do Reverse Mortgages Work

The reverse mortgages are loans, which seniors age 62 or over can take. They let a senior to convert a part of the home equity into cash.

The equity that has been built over years can be paid to you in cash. You do not need to do any monthly payments until you use the home as your principal residence.

1. Can I Qualify For Reverse Mortgages?

To become eligible, you must be 62 or older, you have to own your home and to live there or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan.

2. What Home Types Are Eligible For The Reverse Mortgages?

All single family homes or one, two, three or four unit homes with one unit occupied by the borrower. Also the HUD approved condominiums and the manufactured homes that meet FHA requirements are also eligible.

3. Can The Lender Take My Home?

The reverse mortgages work in that way, that the lender cannot take your home while it is your permanent home.

If your loan balance will exceed the value of your home, the HUD will pay the difference. The lender cannot touch your other equity to cover the difference. This is one of the principles, how do reverse mortgages work.

4. How Do Reverse Mortgages Differ From The Usual Mortgages?

If you take the second mortgage or the home equity line of credit, you have to have a certain income level versus debt ratio and you have to do the monthly payments.

You will qualify for reverse mortgages with whatever income level and you do not have to make monthly payments.

The amount, which you can borrow depends on your age, the appraised value of your home and on the interest rates. The older you are, the more valuable your home is and the lower the interest rates, the more you can borrow.

You do not make monthly payments, because the reverse mortgage will be paid back, when you will permanently move away from the home.

After you have taken the reverse loan, you are still the owner and have to pay your real estate taxes, insurance and other conventional payments like utilities. And one important fact, you cannot be foreclosed or forced to vacate your house.

5. Do I Have To Use The Estate Planning Service To Find Reverse Mortgages?

FHA does not recommend to use private consultants, because they can be costly. FHA gives all the needed information for free and the housing counseling agencies, which are HUD approved, are available for free or at a very low cost, to provide information, counseling, and a free referral to a list of FHA approved lenders.

6. How Do Lenders Pay Me?

Actually you can decide, how you want them to pay you. As a slump sum, as fixed monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence, monthly payments as fixed period of months selected, as unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted or as a combination of the credit line and the monthly payments.

This is it! Here are the terms of the reverse mortgage loans. It is important, that you talk with your family and with the experts about them and about other options to secure your financial future.