Have you heard about a reverse mortgage? Here are the answers to your most burning questions.
1. What is a reverse mortgage?
A reverse mortgage is a type of loan that homeowners aged 62 or older are able to take out. If you have equity in your home, you qualify! With a reverse mortgage, you're able to convert part of your home's equity into cash. The loan product was made to help retirees supplement their fixed income using the accumulated wealth they have in their home. It's enough to cover your health care, living expenses, and other costs.
There is no restriction on how you can use the proceeds from your reverse mortgage, which is why many people are beginning to apply for them.
2. Can anyone apply for it?
If you are aged 62 years or older and you own your own home, you may qualify. If you currently have a mortgage on your home, it must be paid off before you apply for a reverse mortgage or by using the funds from your reverse mortgage. Investment properties and vacation homes don't qualify for the program.
3. How do I apply for a reverse mortgage?
If you are thinking about applying for a reverse mortgage, the first thing to do is get online and begin comparing your options. The amount of money you're able to get is dependent on your age and your specific situation, along with your home's value.
4. If I take out a reverse mortgage, does the bank own my home?
No, you will continue to own your home but the reverse mortgage will have to be paid back. Application costs and fees will apply, so consider this when applying for a reverse mortgage.
5. Do I still need to pay property taxes and home insurance?
Yes, you will be required to continue paying your home insurance and property taxes. You'll also be required to keep up on all mandatory repairs and, in general, keep your home in good condition.
6. When do I have to pay back?
Terms will vary, but in general you'll need to pay for your reverse mortgage back in full when you reach a maturity event. This is when you'll need to speak with your servicer about repaying the loan. If you cannot repay the loan, you may face foreclosure.
7. Is it expensive to do a reverse mortgage?
There are fees associated with the application and loan origination, but those costs vary based on many different factors.
8. Are there different versions of the standard HECM reverse mortgage?
There are three different kinds of reverse mortgages. First, there are single purpose reverse mortgages that some state and local governments offer, along with some non-profit organizations. Then there are proprietary reverse mortgages, which are basically private loans. Finally, there are HECMs, or Home Equity Conversion Mortgages, which are insured by the federal government.
9. What’s the best age to take out the mortgage?
In most situations, you will not be permitted to take out a reverse mortgage until you reach 62 years of age, although there are some exceptions to that rule. There is not one age that is better than another to take out a reverse mortgage, it's dependent on your financial need.
10. What are the alternatives to a reverse mortgage?
If you fear losing your home because you may be unable to repay your reverse mortgage come the maturity date, there are many other options that may be better for you. A personal loan is just one such option that can get you the money you need.
Need more information on reverse mortgages? Speak to one of our loan experts at Horizon Lending Services to see if this is right for you.