What Is A Reverse Mortgage?
A reverse mortgage is a refinance mortgage loan where the mortgage lender does not consider income, credit, or liabilities of the mortgage loan applicant. The only concern the mortgage lender has is the equity in the borrower’s home. The borrower can have bad credit, bankruptcy, foreclosure, late payments, and credit scores below 500 FICO and still get a reverse mortgage as long as the borrower is at least 62 years old or older. A reverse mortgage is a cashout refinance mortgage loan where the borrower needs either a lump sum of cash or a line of credit. Not every homeowner who is 62 years old or older can qualify for a reverse mortgage. For example, a 62 year old homeowner who owns a $100,000 home with a mortgage of $95,000 would not qualify for a reverse mortgage refinance loan. However, a 62 year old homeowner who owns a $100,000 home but has no mortgage balance will qualify for a reverse mortgage. A homeowner does not need to have their home free and clear of a mortgage. They can still have a mortgage loan with a balance but needs to have substantial equity. For seniors who are 62 years old or older who are interested to see if they qualify for a reverse mortgage loan can contact a reverse mortgage loan specialist for a free consultation to see whether or not they qualify for a reverse mortgage loan and how much they can cash out from their refinance reverse mortgage loan.
Benefits Of Reverse Mortgage: Relief For Seniors In Need Of Cash
There are many benefits of reverse mortgage for seniors. Most senior homeowners who retired may have exhausted their lifelong savings or may be in fixed income. They may have a home that is free and clear of a mortgage but are still responsible to pay their property taxes and insurance. Being a homeowner comes with financial liabilities. A senior homeowner may need unexpected funds for major housing repairs such as a new roof, new plumbing, updating electrical or HVAC systems, or their fixed income may not be enough for them to pay day to day living expenses. Senior homeowners may have a difficult time to do a cashout refinance mortgage on their current home due to not being able to qualify since they have no income or very little income no matter how much equity they have in their home. With a reverse mortgage, it is possible for a senior homeowner who has equity in their homes to get a cashout refinance through a reverse mortgage. A reverse mortgage is a cashout refinance mortgage loan for those seniors who are 62 years old or older where they get either a lump sum of cash or a line of credit where they never have to ever make a mortgage payment again until the house is sold or the homeowner passes. However, the reverse mortgage refinance borrower is responsible of making their annual property tax payments and homeowners insurance payments as long as the reverse mortgage refinance loan is in effect. The reverse mortgage loan borrower needs to be an owner occupant and cannot rent out their home.
How Do Reverse Mortgage Work?
A reverse mortgage allows an owner occupant homeowner who is at least 62 years old or older to borrow against the equity of their home. Traditional mortgage loans require that the mortgage loan borrower make principal and interest payments every month to their mortgage lender. However, with a reverse mortgage, the mortgage lender makes payments to the reverse mortgage loan borrower. There are several ways a reverse mortgage lender makes payments to the borrower. The reverse mortgage lender can pay a lump one time sum to the reverse mortgage loan borrower. The reverse mortgage lender can make a fixed monthly amount to the reverse mortgage loan borrower for as long as the homeowner owns and occupies their home. The reverse mortgage lender offers a line of credit. Or the last option, where the reverse mortgage lender offers the combination of the above options where they offer a partial sum, monthly payments, and line of credit.
Reverse Mortgage Eligibility Requirements
As mentioned earlier, a homeowner needs to be at least 62 years old and have substantial equity in their home. If the current home has a mortgage, the current mortgage needs to be paid off from the proceeds of the reverse mortgage loan. The borrower’s credit, income, and liabilities does not matter and a reverse mortgage loan borrower can be late on their existing mortgage loan or have derogatory credit as long as they have sufficient equity in their home. The older the homeowner is, the more they can borrow. The home cannot be currently listed on the MLS and an appraisal is required. The reverse mortgage loan borrower needs to intend on occupying the subject property as their primary residence and if they ever decide to rent the home or not be an owner occupant, they are in violation of their reverse mortgage loan agreement. The mortgage loan borrower can sell their home. How reverse mortgage work is the reverse mortgage lender advances the homeowner a set amount of money. Then the original loan balance increases every month, principal and interest payments. There is no expiration date with a reverse mortgage. If a 62 year old reverse mortgage loan borrower lives to be over 100 years old, the borrower still does not need to pay a single mortgage payment. The mortgage balance can exceed the future appraise value and the borrower still is not liable and under no obligations to pay the reverse mortgage balance and/or payments. Again, the reverse mortgage loan borrower is responsible to pay property taxes, homeowners insurance, and homeowner association dues if applicable.
Are There Any Upfront Costs For Reverse Mortgage Refinance Loans?
There are costs associated with reverse mortgage refinance loans but all the fees and costs can be included and rolled into the balance of the reverse mortgage loan. The only upfront cost that a reverse mortgage loan borrower is responsible for is the appraisal fee. The costs and fees associated with a reverse mortgage loan is the FHA mortgage insurance premiums, service fees if the reverse mortgage loan borrower selects to get a monthly guarantee payment, and typical closing costs like title charges, recording fees, and credit report fees. Interest rates for reverse mortgages are normally higher than traditional FHA mortgage loan programs. Reverse mortgage loan applicants needs to complete a HUD approved counseling course in order to proceed with the reverse mortgage application process. There are many benefits of a reverse mortgage for seniors who have ample equity in their home but are struggling financially due to have very little income or no income.