May 5th, 2018 8:29 AM by Jackie A. Graves
mortgages are a popular way for older Americans to tap into the equity in their homes to
fund their retirement. But there are strict rules governing who qualifies for a
reverse mortgage, how much income they provide, and how much they cost.
more, the federal government made important changes to those rules in 2017. If
you are considering a reverse mortgage
for your home, it’s more important than ever that you understand the
basic rules and regulations.
Reverse mortgages: An overview
most common type of reverse mortgage is a Home Equity Conversion Mortgage
(HECM) offered by the Federal Housing
Administration. These reverse mortgages allow homeowners to receive
home equity loan payments from a bank—either as a lump sum or as ongoing
payments—based on a percentage of the amount of equity they’ve accumulated in
their home. Once the borrower dies or stops living in their home for 12 months,
the loan, along with any interest, must be paid off.
retirees use reverse mortgages to cover unexpected expenses, such as health
care costs or home improvements. However, many financial experts suggest
mortgages as a last resort, since it often doesn’t make financial
sense to sacrifice home equity for income. Anyone who is considering moving
forward with a reverse mortgage should seek sound advice from a financial
homeowner who is age 62 or older is potentially qualified for an HECM reverse
mortgage provided they are not delinquent on any debts owed to the federal
government. There are no requirements related to income of health status of the
borrower, but there are four main restrictions that apply to the borrower’s
qualify you must also participate in an information session offered by a U.S.
Department of Housing and Urban Development (HUD) counselor. Counseling isn’t always
are no restrictions on how a borrower uses the money they receive from a
reverse mortgage. The size of the payments a borrower receives depends on a few
the borrower gets paid depends on the type of mortgage. Homeowners with fixed-rate mortgages receive lump sum payments
while homeowners with adjustable-rate mortgages can choose between receiving a
lump sum, fixed monthly payments, a line of credit or some combination of these
main cost of a reverse mortgage is the home equity that the borrower gives up
in exchange for income. However, there are also substantial closings costs
involved. One of the most significant of these costs is mortgage insurance.
Premiums are based on the appraised value of the home, and include an initial
insurance premium equal to 2 percent of the appraised value of the home, along
with ongoing annual premiums equivalent to 0.5 percent of the value. The
overall amount of the closing costs, which also include appraisal fees and
origination fees, is largely determined by the home’s value.
To view the original article click here Apply to
Buy a Home Apply to