Reverse mortgages have begun to gain in popularity. It was introduced in the year 1989, and such loans began to enable seniors of the age 62 or high to access a certain portion of the home equity without being forced to move.
The bank offers payments to the borrower throughout their lifetime, which is based on the percentage of the home equity. The loan balance will not have to be paid back until the borrower is deceased, sells the property, or moves out of the dwelling permanently.
Reverse Mortgage Breakdown Points:
- The bank will make payments to the borrower, which is based on the accumulated equity of the home.
- Once the borrower dies, sells the property, or moves out; the loan is then repaid.
- Those of the age 62 or higher who own their homes with no balance or have small mortgages can apply for the reverse mortgage.
- The money can be used for any purpose. Typically those who have retired use the money to survive.
How much money are you able to receive?
Stated by the National Reverse Mortgage Lenders Association, also referred to as the NRMLA, there are several factors that can determine the amount of money you are eligible for through a reverse mortgage. These factors include:
- Age
- Value of the Property
- Interest Rate
- Lending Limit
In order to be eligible for a reverse mortgage, you will need to either own the home outright or have a very low mortgage balance that is able to be paid in full at the closing during the proceeds of obtaining the reverse loan.
You will also need to use the home as your primary residence. Typically, the older that you are, the more valuable the home is, which means the more money you are able to receive.
There are no restrictions on the borrower can use the money when obtaining the reverse mortgage. This means those with medical bills, those that have retired, or those who have lost their jobs are able to use the money any way they see fit.
Things to Consider
You will need to keep in mind that reverse mortgages can be costly at times. This is a wonderful tool to have at your disposal should you need extra funds, but it is crucial to be aware that the funds can make an impact on your Medicaid and your Supplemental Security Income Benefits.
Due to this factor alone, those who look to take out a reverse mortgage are required to take a counseling class that is free. It is conducted by the Department of Housing and Urban Development or another national counseling agency like AARP.
The potential borrower will be able to learn the insides and the out to receive all necessary information that may not be clear before they decide to go this route. They will be shown other routes of opportunities to help aid them in the issue that has led them to wanting a reverse mortgage.