Reverse mortgages are special mortgages available to you only if you are at least 62 years old. If that is all you know about them then you probably have many questions about such things as how they work, how to qualify for them and why they are referred to as “reverse.” Below are several reverse mortgage questions and answers to help you understand them better.
Why are Reverse Mortgages Better During Retirement Than Other Home Loans?
Reverse mortgages are better than other home loans during retirement because they offer more flexibility and security in multiple ways. For example, you must be a resident of the home for a reverse mortgage contract to continue. If you get another type of home loan and miss a payment you can be forced out of the home by the lender. However, you will have no set repayment schedule for a reverse loan. Therefore, you cannot miss payments in the same way.
Reverse mortgages are also better than other home loans during your retirement because of how you can borrow and spend the money. In the case of standard home loans you must pay off what you borrow in a certain time span. A reverse mortgage has no such requirement, but there is a limit to the amount you can borrow. A reverse mortgage calculator can be used to determine that limit with a formula. The formula used by the reverse-mortgage calculator will take into account current governmental limits regarding borrowing percentages. Once the amount you can borrow has been determined you can borrow it as a lump sum, line of credit or in installments.
Where Are Reverse Mortgages Usually Offered?
Reverse mortgages are usually offered in financial institutions, such as banks. However, the Federal Housing Administration (FHA) and other organizations also offer them. When seeking out a reverse mortgage lender you can opt for a government reverse loan, called a home equity conversion mortgage. You can also forego an HECM in favor of a reverse mortgage from a local lender. However, in either case you should obtain a reverse loan only from a trusted source. Reverse mortgage scams are quite common and must be avoided.
How Can You Qualify for a Reverse Mortgage?
In addition to being at least 62 years old, you must own the home in order to apply for a reverse mortgage. If you have a cosigner, he or she must be your spouse or relative. He or she must also live in the home permanently with you. The home must also have a high enough value for the lender to agree to provide you with the loan.
What Types of Homes Can You Take a Reverse Mortgage Out On?
You can take out a reverse mortgage on any type of single-family house if you are a permanent resident of that house. If you own an apartment or condominium with a high enough value that meets FHA and HUD requirements, you may also qualify for a reverse mortgage on that property. If multiple apartments are present in the building, you must reside in one of them permanently. In other words, you cannot use another place as your primary residence.
Can You Take Out a Reverse Mortgage and Another Home Loan?
You may not maintain two or more home loans when you have a reverse mortgage. However, you may apply for a reverse mortgage if you have an existing loan. If you are approved, you will simply be required to use the reverse mortgage money to pay the balance on the earlier loan before collecting additional funds for other purposes.