Reverse Mortgages
A reverse mortgage is a loan available for homeowners over the age of 62 who have either paid off their mortgage or have a lot of equity in their home. Payments are essentially reversed allowing the homeowner to convert their equity into income - in the form of a lump sum payment, monthly payments for life or even a line of credit. This income potential enables the elderly homeowners to afford basic needs such as health care, living expenses and improvements to the home. The homeowner does not make payments to the lender, rather the lender makes payments to the homeowner hence the name reverse mortgage.
This is a good option for people who are over 62, who occupy the home, have equity and would like to supplement their income. FHA offers the most popular reverse mortgage product. There is a yearly fee for this loan which is added to the balance (not due from the homeowner). Any existing mortgage must rolled into the new reverse mortgage and paid off by part of the proceeds. And FHA requires that homeowners receive reverse mortgage counseling before receiving the loan.
Both the mortgage and payouts depend on age of the homeowner, property value, equity in the home, payment option the homeowner elects to take, and current interest rates. The interest rate will determine how much interest accrues onto the principle balance and is usually an adjustable rate. However, the adjustable rate does not change the monthly payments - these will stay the same over the term of payout.
The mortgage is repayable when the homeowner vacates the property -- either by death, sale of the home or upon moving to a different residence. At this point, the home will be sold to pay off the mortgage. In lieu of selling the property, the homeowner, homeowners family or homeowners estate can choose to pay off the mortgage and retain the property. If the proceeds from the sale of the home exceed the reverse mortgage payoff amount, the surplus goes to the homeowner or the homeowners estate. Any shortfall from the sale is usually covered by an insurance company or other such provider and would not be the liability of the homeowner or their estate.
There are no income or credit requirements for a reverse mortgage and a homeowner cannot be forced to sell the home to pay off a reverse mortgage as long as they are living in the home.
If you are interested in finding out more about a reverse mortgage, call Envision Lending Group to discuss your options or Apply Now!
