What Is A Reverse Mortgage?

A reverse mortgage is a mortgage loan program that applies to those who are at least 62 years old or older and have equity in their home.  You do not need good credit or income to qualify for a reverse mortgage.  However, you do need equity and the amount of equity depends on how old you are.  The older you are, the less equity you need.

Reverse Mortgages Are Equity Based Home Loans

A reverse mortgage is a mortgage loan program where the reverse mortgage lender will do a refinance on your current home and you no longer have to pay your monthly mortgage payment.  Your monthly mortgage payment interest gets added to your loan balance every month until the homeowner sells the home or passes away.   The homeowner needs to pay for the annual property taxes, homeowners insurance, and hoa dues ( if any ) .  Reverse mortgage loans are only available for those who are owner occupant and not available for second homes or investment homes.

Mechanics For Reverse Mortgage Loans

Reverse mortgages are for those homeowners who have equity in their homes and are at least 62 years of age.  The younger the homeowner is the more equity that is required because the mortgage lender assumes that the homeowner will live longer and will have the liability for the longer life span of the homeowner.  For example, if a homeowner is 62 years of age, the mortgage lender may require 40% equity in the home whereas if the home owner is 72 years of age, the equity requirement might be 30% and if the homeowner is 80 years old, the equity requirement might be 25%.  There is a chart on the amount of equity required where we can discuss on future articles.  These figures are just for illustration purposes and we will not cover the specifics because reverse mortgages are complex deals.

Housing Counseling Required

The reverse mortgage borrower also needs to take a housing course and receive a completition certificate before they can move forward with the reverse mortgage. The homeowner can take cash out from a reverse mortgage or get monthly cash or a line of credit.  If the homeowner does not have enough equity for a cash out refinance or a line of credit, they might be able to qualify just for a reverse mortgage where they no longer have to pay any more mortgage payments.

Borrowers Of Reverse Mortgages Do Not Ever Need To Make A Mortgage Payment

Reverse mortgages are a great mortgage loan product for seniors who have limited income and can no longer afford their mortgage payment or those who need extra cash but cannot due a cashout refinance mortgage loan because they are retired and no longer qualify for a refinance loan due to no income or limited income.

By Gustan Cho

www.gustancho.com

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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