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What is a Reverse Mortgage?
What is a Reverse Mortgage? Getting the Facts
At Caliber Home Loans, we hear these questions all the time, “What is a reverse mortgage? Is it right for me? Can I qualify for this type of loan?”
You undoubtedly found this page because you’re considering this type of loan, and would like to get some information without making a commitment. This page covers a lot of ground quickly, but you can always get more personalized information by calling us at Caliber Home Loans at (855) 926-2258.
First, it’s important to understand what a reverse mortgage actually is.
Answering the Question – What is a Reverse Mortgage?
A reverse mortgage is a home equity loan that allows homeowners, where at least one borrower is over the age of 62, to access a portion of their home equity and convert it into loan proceeds. The first use of the proceeds is to payoff any mortgage balance and liens on title. Depending on the type of loan you choose, the options for the rest of your proceeds could be a lump sum, a tenure payment or payment for life, a payment for a given term, or a line of credit that will grow over time. The fixed rate option is a lump sum only loan where the adjustable rate provides more options for you to receive the proceeds.
With a traditional mortgage you are required to make monthly payments, but this is not a condition of the terms of a reverse mortgage. Throughout the course of your reverse mortgage loan, you will be required to pay your property taxes, homeowner’s insurance, any homeowner’s dues and maintain your home in good working condition. The key to any reverse mortgage is to minimize your monthly housing budget and maximize your cash flow and access to money when you need it most.
Obviously, this can be a life changing opportunity, giving retirees a chance to establish more secure financial footing, or simply improve the quality of their life. Our clients have used their loan proceeds to pay off their existing mortgage, pay down bills and medical expenses, add to their monthly retirement income, make home improvements, and deal with unforeseen expenses. Indeed, a reverse mortgage can provide you with the financial assistance you’re looking for.
Additional Reverse Mortgage Information
It’s important to note that you will not give up ownership of your home. When you get a reverse mortgage, you retain the title to your property and it stays in your name.
There are also no prepayment penalties, and you can pay off the loan anytime you wish without incurring a penalty.
Reverse mortgages are non-recourse loans. This means that if the loan balance is greater than the value of the home when the property is sold, the lender cannot seek to recover the additional loan balance from you, the co-borrower, or the assets of your estate.
Repayment of the loan is not required until you or the last surviving borrower sell, move, or pass away. You will still need to remain compliant with the terms of the loan, but as long as you continue to own the home and occupy it as your primary residence, the reverse mortgage does not become due and payable.
Can I Qualify for a Reverse Mortgage?
Eligibility will require meeting certain basic qualification, although they are not all inclusive.
- A homeowner where at least one person on title is 62 or older and a US citizen or permanent resident.
- The home is your primary residence
- All underlying mortgages and liens must be satisfied at closing
- Pay on going property taxes, homeowner’s insurance, and HOA dues and maintain the home in good working condition
- All federal debt must be paid and current,
For the property to be eligible for a reverse mortgage, it must meet FHA minimum property standards. We lend on the following property types:
- Single Family Home
- 2-4 Unit Homes in which One is Occupied by You
- HUD-Approved Condominiums
- Some Manufactured Homes on owned land
The loan amount will be based on the age of the youngest borrower currently on title, the expected interest rate, and the lesser of the appraised value of your home or sales price, and FHA maximum lending limits for your county.
Planning your long term goals takes a great deal of care. Our team is available to help answer your questions. To see how a reverse mortgage could work for you, call us at at (855) 926-2258, email us at firstname.lastname@example.org , or by filling out our online form.