The Reverse Mortgage Process - How Does it All Work?
A reverse mortgage can be a useful tool for many current home owners. It can give you money when you need it most in your later years of life. If you have been searching for a way to supplement your retirement or gain money for a much needed expense, then this may be the ideal solution for you. The information below will provide you with a comprehensive overview of the process and will help to give you an idea of whether it will work for you.
Who Qualifies for a Reverse Mortgage?
To qualify for this type of mortgage program, you need to meet only two criteria, and you will not be subjected to credit approval, income verification or any of the other cumbersome activities of a traditional mortgage. You must be at least 62 years old and have a considerable amount of equity in your home in order to qualify for this program. If you do not meet these two criteria then it is not for you.
How Does it Work?
Unlike a traditional mortgage a reverse one pays you instead of you making payments to the bank. The amount you receive will vary according to the amount of equity that you have in your home. You can choose to receive your payment in four various ways, through a lump sum, in monthly payments, as a line of credit, or any variation of the above methods. You will have a closing just as you did with a traditional mortgage, and some closing costs will be required on your part.
Will They Take Your Home?
No, the bank will never take your home in a reverse mortgage without first giving you or your family the options of buying it back. You are not required to make any payments on the loan associated with a reverse mortgage until you die or no longer occupy the home. At this time, you or your surviving family can sell your home and keep what is left over after paying off the loan. If there is no equity left in the home or a negative amount is owed to the bank, then they take the loss and the profits from the home?s sale. However, once you move or pass on, your family can choose to pay off the loan and keep the home if they choose.
A reverse home mortgage can be an invaluable supplement for those with a low pension or only social security payments during retirement. You can get a lump sum for an emergency, or just enjoy doing what you have always wanted to in your golden years. Review all of the information above, and you should have a better idea of whether this type of program would work for you.
Reverse Mortgages - For Better or Worse
A reverse mortgage is a loan available to seniors. Specifically those ages 62 and over. This is a tool used to release the home equity in the property as one lump sum or multiple payments. Since the reverse mortgage is releasing equity in the home, it is only available to seniors who owe less than the home is worth.
The homeowner’s obligation to repay waits until the owner dies, the home is sold, or the owner moves out of the home. A reverse mortgage is much like an annuity where the principal and interest payments are paid with homeowner’s equity.
In a conventional mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity inin his or her property increases. After the end of the term (10, 15, 30 years or whatever term the mortgage was originally opened for) the mortgage has been paid in full and the mortgage/lien is released by the lender.
In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. As the owner receives monthly payments, or a bulk payment of the available equity percentage for their age, the debt on the property increases each month, thus the repayment amount grows.
In the United States there are no minimum income or credit requirements to qualify. There are other requirements and homeowners should make sure that they meet these qualifications for the loan before they invest significant time or money into the process. Usually in a reverse mortgage the proceeds can be used for almost any legal purpose. The majority of such programs do require that the reverse mortgage be the only mortgage on the property. Thus the borrower is generally required to pay off any existing liens or mortgages with the proceeds of the reverse mortgage and/or personal funds.
Reverse Mortgage Lenders - How to Choose One That Will Work Best For You
There are limitless options when it comes to choosing reverse mortgage lenders. Almost every bank and financial institution offers their own service, and some outside companies will offer them as well. How do you make sure that you get the best deal and don?t get taken advantage of? There are certain factors that should be considered when making the choice of which lender you should choose to handle your reverse mortgage.
Do They Want Upfront Fees?
If a lender is asking you for all sorts of upfront fees, then they are more than likely not reputable and even if they are they are trying to overcharge you. There are a variety of options available on how to pay for reverse mortgage fees, and none of them involve paying large upfront fees. The best reverse mortgage lenders will work with you to develop a plan of action that minimizes the total in fees which must be paid.
Are They Hard to Reach?
Even though a reverse mortgage is not quite as in depth as a regular one, you still may have questions or concerns along the way. Good reverse mortgage lenders will be available during operation times, and will return missed phone calls in a prompt manner. They will also call to update you as to the where you are in the process along the way. If your chosen lender is not willing to answer questions or is difficult to get a hold of, then you should move on.
Will They Explain the Process?
Although there are many benefits to getting a reverse home mortgage, it is still a fairly daunting and confusing process to a consumer. The best reverse mortgage lenders will be willing and happy to explain the entire process to you so that you can be clear on the terms involved. There is no need to work with a lender who just wants you to sign where they say sign without explanation.
A reverse mortgage can be a wonderful way to take advantage of the equity in your home and get the money that you need now. However, it can be difficult to find the best reverse mortgage lenders who will help to make the process a smooth one. The factors above can help you when choosing a lender who will work with your best interests in mind.
The Home’s Value
You will be asked for the current value of your home which can be a rough estimate from a site online that posts housing estimates based on certain geographical factors, or you may have an updated copy of a recent appraisal.
Another option is to have the lender send their appraiser the information on your home in order to derive a rough estimate. This is one of the most important pieces of information asked for by reverse mortgage calculators. Having an appraiser come out usually adds extra costs which you end up having to pay whether you qualify for the reverse mortgage or not.
Importance of Credit Scores
It is common that in any situation involving a bank, one would become concerned over their credit score.
In the case of Reverse Mortgages, your credit score is pretty much irrelevant.
You see, in a Reverse Mortgage, you are being paid on the equity you already have in your home. So whether you have perfect credit, or credit that’s been through 15 rounds with the heavyweight champion, your credit score is very unlikely to have an impact on your reverse mortgage.
Since all payments are TO you, not FROM you, your ability to manage your money is of little concern to the lender. Cold though it may seem, most lenders just won’t care.
This is not to say you shouldn’t care about your credit score. It is always in your best interest to know what your credit report says about you. Only in regards to your reverse mortgage is the credit report a non-issue.