Top Ten Things to Know if You re Interested in a Reverse Mortgage
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Top Ten Things to Know About Reverse Mortgages
Summary:
Reverse mortgages are gaining popularity in the U.S., providing a way for older Americans to achieve greater financial security. Created by the U.S. Department of Housing and Urban Development (HUD), this federally-insured loan helps seniors supplement income, cover unexpected expenses, and make home improvements.
1. Understanding Reverse Mortgages
A reverse mortgage allows homeowners to convert home equity into cash. Unlike traditional home equity loans, repayment is not required until the home is no longer the borrower's primary residence. HUD offers a safe, federally-insured reverse mortgage option.
2. Eligibility Criteria
To qualify, you must be at least 62 years old, own your home outright or have a low mortgage balance, and live in the home. HUD-approved counseling is required before obtaining the loan. Contact the Housing Counseling Clearinghouse at 1-800-569-4287 for more information.
3. Prior FHA Mortgage Insurance
You can apply for a HUD reverse mortgage even if your home wasn’t purchased with FHA insurance. Your property just needs to meet HUD standards.
4. Eligible Properties
Eligible properties include single-family homes, two-to-four unit properties, townhouses, some condominiums, and manufactured homes. Condominiums must be FHA-approved and meet certain standards. Repairs can sometimes be made after closing.
5. Reverse Mortgage vs. Home Equity Loan
Reverse mortgages do not require monthly payments or a specific income level to qualify. The amount you can borrow depends on factors like age, interest rates, and home value. You continue to pay real estate taxes and utilities but can’t be foreclosed for missing payments on the reverse mortgage.
6. Loan Duration Concerns
You won’t lose your home or need to repay the loan as long as you live in the home and keep taxes and insurance current. You can never owe more than your home’s value.
7. Leaving an Estate for Heirs
When you sell your home or no longer use it as your primary residence, the loan plus interest and fees are repaid. Remaining equity belongs to you or your heirs, and no debt is passed to them.
8. Determining Loan Amount
The amount you can borrow is influenced by your age, interest rates, loan fees, and your home’s appraised value or local FHA mortgage limits.
9. Avoid Estate Planning Services
HUD advises against using services that charge fees to connect you with lenders. Free assistance is available through HUD-approved counseling agencies. For information, call 1-800-569-4287.
10. Payment Options
Payment methods include:
- Tenure: Equal monthly payments for as long as you live in the home.
- Term: Equal monthly payments for a set period.
- Line of Credit: Flexible payments as needed until the credit is exhausted.
- Modified Tenure/Term: Combines a line of credit with monthly payments, either indefinitely (Tenure) or for a set term (Term).
Explore these options to find the one that suits your needs.
For more details, visit the official HUD website.
You can find the original non-AI version of this article here: Top Ten Things to Know if You re Interested in a Reverse Mortgage.
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