Are You Over 62? Then You’re Eligible For A Reverse Mortage
Are You Over 62? Then You’re Eligible For A Reverse Mortage – A reverse mortgage is a loan that many senior citizens that own their own homes consider. A reverse mortgage also sometimes referred to as a lifetime mortgage. For someone to be eligible for a reverse mortgage they have to be 62 years of age or older. REST ASSURED, reverse mortgage is especially for all you retired persons who love your homes. Your home itself can reap an income. You need to pay no money to the lenders. On the contrary you’ll be earning. That’s what reverse mortgage is all about.
You needn’t pay reverse mortgage ever, exceptions are if you:
- Sell the house
- Permanently move out
- Note: If your house is under a joint ownership, the surviving partner can continue living in the house. All conditions apply as before.
The amount borrowed is always limited by a certain percentage of:
- The total property value
- Life expectancy
- Real estate market values
- The older you are the more you are allowed to borrow, but always within permissible limits.
The proceeds of the reverse mortgage can be disbursed in the ways listed below:
- As lump sum
- In parts
- As a line of credit
- Pool in all the options
- If you were to sell the house, the outstanding amount (after covering the loan) can be retained by you or your heirs.
It has various aspects which must be taken care of while availing this:
Age: You should be 62+ (the youngest joint owner should be of the above age)
- Your house should be either a condominium or a manufactured house, not a mobile or cooperative
- You should be the owner of the house
- You should reside in the house
- Note: If there is any outstanding amount of an earlier mortgage, it will be paid by reverse mortgage.
Financial Security: The income from the reverse mortgage would help secure an independent future. It could be used to finance your in-home health care and other expenses. The standard of living too can be maintained as before.
- It’ll be your home: You can retain the ownership and ‘must’ live there.
- No Payments: You need not pay monthly.
- Tax-Free Income: Your income from the proceeds is not subject to tax.
- No Risk: You will not be able to borrow more than the market value of your house. So, you will never risk more money even if your house goes.
- Not like other loans: You will not have any income or asset limitations like other home equity loans.
- Tension Free: Last but not the least, you will have peace of mind.
When considering getting a reverse mortgage on your home it is wise to become knowledgeable about the fees that are associated with the loan itself. There is an origination fee, which is a fee for setting up the loan and processing it or getting all the proper documents ready. There are also servicing fees, which are fees for the time that you have the loan, for keeping records and statements that occur along the way.
Another thing to consider with a reverse mortgage is that interest accrues like any other loan. The homeowner is also still responsible to pay property taxes, and home insurance during the loan.
Something else to consider when getting a reverse mortgage or a lifetime mortgage is that it usually winds up utilizing all of the equity in the home. If you are a senior citizen and thinking about getting a reverse mortgage on your home, it will more than likely mean the house won’t be passed along to a relative or heir.
In the past there have been some complaints about reverse mortgages due to the higher fees associated with the reverse mortgage compared to other mortgages. There have also been concerns of the mortgage being very difficult to understand, as far as the terms.
Remember that like any loan or mortgage that no two lenders are the same and it would be wise to compare all the choices and lenders.
Disadvantages of Reverse Mortgages
Reverse Mortgages are a new way to get money out of your home. You won’t have to put your home up for sale or do any loan repayments. What a reverse mortgage does is give you a loan without payments back to the loan company. The loan goes to the home that is your primary residence and can be revoked upon the selling of that house or if you move and the residence is no longer your primary (in cases like rental property). The loan is only paid back upon death or the selling of the house that is up on the reverse mortgage. While tempting, there are some disadvantages of reverse mortgages.
Things to Consider
Do you have a family and heirs? Think about what this will mean for them. Chances are the inheritances that they would normally get will be eaten up in fees, interest, and loan repayment. A reverse mortgage will be coming off the top of any insurance payouts, significantly reducing if not eliminating much of your estate upon death. There is a way to keep this from happening, but it will involve the home either being kept in the family and having the heirs pay off the balance of the loan. Another way is to sell the house in question, either for as much as the loan or lower and having to make up the difference between the selling price and the loan with the addition of interest and fees. Those with known heirs that want to care and provide for them upon death should reconsider a reverse mortgage because of this negative aspect.
You’ll need to reconsider a reverse mortgage if you believe that you will be moving or something will come up having moving be an option. Reverse mortgages will become payable in full upon a move from the residence that is held in the mortgage. Some of the upfront costs are higher in a reverse mortgage than a regular mortgage and if you love you are not going to have the house in question as a primary residence so you will be due for all the cash that was loaned. This can put a serious hindrance on moving and the financial future you want to have. Reverse mortgages are not good for those that have a tendency to move around frequently or with jobs that have them traveling and relocating often.
Low income families may think this is a good idea for supplementing their income and having a home without a payment. However, there are aspects of the reverse mortgage that will negatively impact the way you are qualified for those low income assistance. Social Security and Medicare are two that are not negatively impacted, however there are some state and other federal assistance programs like Medicaid that will be. In those instances, your assistance can be lowered or even revoked with the receiving of a reverse mortgage. This is one of the most serious of the disadvantages of the reverse mortgage, as those with a low income jump through many hurdles to get approved.