Reverse Mortgage

Reverse Mortgage Information

A reverse mortgage is a specialized loan type designed to provide retired seniors the ability to tap into their home equity and generate additional income without the obligation of repaying the debt. Essentially, reverse mortgage loans do just the opposite of traditional mortgages, by disassembling the equity in a property to receive payment, rather than accumulating it through monthly mortgage payments.

For detailed information how the process of a reverse mortgage works in detail, visit Lender411's indepth page on How a Reverse Mortgage Works

Reverse mortgage can be funded through different options such as: monthly payments, in a lump sum, through a line of credit, or as a combination of two or more of these options.

With this disbursement flexibility, reverse mortgages may be a convenient option for many senior homeowners who can receive payments according to their personal circumstances.

For more information on the different types of payment options for a reverse mortgage, visit our Lender411 Reverse Mortgage payment page.

Reverse Mortgage Information: Qualification

Acquiring a reverse mortgage tends to be much easier than procuring any other sort of loan. In order to secure a reverse mortgage, you must meet the following requirements:

• You must own a home.  When securing a reverse mortgage, you do not have to own your home in full, but the home must be your own. The property also must qualify as a single family resident (SFR), multi-family residence of 2-4 units, or HUD-approved condominium or manufactured house that meets all FHA guidelines.
   
• You must be 62 years old or older.  Homeowners over the age of 62 can qualify for a reverse mortgage if they participate in a consumer information seminar held by an approved HECM counselor.  The older you are, the lower the associated fees will be.
   
• You must reside in the home as your primary residence.  You cannot take out a reverse mortgage on a home you don’t live in, even if you own it as an investment property or a vacation rental.  The home you mortgage must be your primary residence. In addition, you must continue to reside in the home as your primary residence while receiving payments through the reverse mortgage.  If you move into a new home, the amount loaned to you become due in full.
   
• You do not have to pass any credit requirements to obtain a reverse mortgage.  The ownership status on your home is all that is required to qualify, since the loan is taken against the equity of the home.
  
  Visit Lender411's comprehensive page on Reverse Mortgage Requirements & Qualifications for more information. 

HUD (FHA) Reverse Mortgage Info

Following the economic downturn and housing crisis, reverse mortgages insured by the federal government have nearly replaced all other types of reverse mortgages. Known as Home Equity Conversion Mortgages (HECM), these reverse mortgages make up 95% of reverse mortgage loans and offer the peace of mind that the loan is secure and protected by the United States Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). To find more information regarding reverse mortgages, the HUD website provides a helpful summary and outline of the program.

Information on Reverse Mortgage Advantages and Disadvantages
 

Visit Lender411's comprehensive pages on Reverse Mortgage Advantages & Reverse Mortgage Disadvantages.

Information on Reverse Mortgage Pros and Cons

Reverse Mortgages Benefits

A reverse mortgage can be an invaluable asset for senior homeowners and presents many benefits. For instance, reverse mortgages provide borrowers with a tax-free source of income that can be applied to anything, from medical expenses, outstanding debts, old mortgages, or even a vacation. In addition, reverse mortgages do not require any immediate repayment or monthly mortgage charges, instead tapping into a borrower’s equity for funds.

Furthermore, reverse mortgage qualifications are much simpler than traditional loans, which require many forms of verification and approval. In contrast, reverse mortgages require only that borrowers be age 62 or above, own at least 30% of the equity on their property, and that the property be the borrower’s inhabited primary residence. Finally, since reverse mortgages are “non-recourse” loans, borrowers do not worry about leaving heirs with debt, as they will not be responsible for paying any decrease in equity during the course of the loan.

Reverse Mortgage Drawbacks

Although reverse mortgages provide many homeowners with tremendous benefits, they are not necessarily right for everyone and carry their share of drawbacks. For instance, reverse mortgages include much higher closing costs and fees than traditional mortgages; while this does not generally present an issue in terms of affordability, some borrowers may prefer to use a cheaper alternative.

In addition, reverse mortgages may adversely affect senior homeowner’s income from government programs such as Medicaid and Social Security Supplement, which impose eligibility limits on a citizen’s monthly income. Furthermore, reverse mortgages expose borrowers to a certain degree of risk if the loan becomes due before the intended date; this may occur if the borrower must leave the residence for medical reasons or if property taxes or relevant insurance on the home is not paid.

View Lender411's Indepth Analysis of the Pros & Cons of Reverse Mortgages.

Reverse Mortgage for Purchase

Reverse mortgages may be used to move into a new home if the home is purchased during the closing process of the reverse mortgage. In this case, the equity from your current home applies toward a substantial down payment on the home you wish to purchase.  The lender provides the remaining equity to you as income, and the reverse mortgage debt that you owe depends on the value of the newly purchased property.

This option is invaluable to seniors who wish to relocate in order to live in closer to their families or friends.  Basically, the reverse mortgage purchase option is much like a streamlined refinance, home sale, and new home purchase all at once; you do not have to worry about extraneous paperwork, verification process, or multiple fees.  As such, reverse mortgages applied to a home mortgage can be one of the best home purchase opportunities available to seniors who qualify.

View Lender411's informational page on  Reverse Mortgages for Purchasing a New Home

Reverse Mortgage Counseling

As previously mentioned, borrowers who want to secure a reverse mortgage must attend mandatory reverse mortgage counseling. Although required, this meeting is tremendously beneficial; due to the complicated terms and unusual characteristics of reverse mortgages, many borrowers do not fully understand the program until discussing it with a qualified HUD-approved counselor. This session allows potential borrowers to seek answers to any questions or clarify any concerns regarding reverse mortgages to determine whether or not the reverse mortgage option is optimal under the given circumstances.

For common questions and issues regarding reverse mortgages, visit our Lender411 Reverse Mortgage FAQ for helpful answers.

Find a Reverse Mortgage Lender

The most important decision to make in the process of acquiring a reverse mortgage is selecting the right reverse mortgage lender. Prospective borrowers should always compare lenders to see who offers the lowest rates and charges the lowest fees. However, always ensure that your lender is both qualified and experienced in order to avoid any potential mishaps. For borrowers looking to acquire a reverse mortgage, visit our Lender411 Find a Lender page, where you can conveniently locate all nearby lenders within your area who offer reverse mortgages.

With an active network of qualified mortgage professionals who are ready and willing to help you, Lender411 can help you to shop around when making this weighty financial decision.

In addition, visit our Ask a Question page in order to receive prompt, thorough advice addressing all of your reverse mortgage inquiries.

Applying for a Reverse Mortgage

Once you’ve attended counseling and selected a lender, application for a reverse mortgage is extraordinarily straightforward. You will not need to provide any credit background, and your lender will not need any extensive paperwork or personal documentation.  Simply follow the steps outlined in our reverse mortgage checklist to apply for your reverse mortgage and secure the income you need for retirement.

If you are seeking a reverse mortgage, speak with a qualified lender today and make the first step toward a smart, educated mortgage decision. To  start your Reverse Mortgage Loan today, fill out our form at the top of the page by clicking Request a Quote.