What You Need to Know About Reverse Mortgage Applications

If you want to apply for a reverse mortgage, you have to be at least 62 years old. It is a loan meant to help you by giving you more money when you retire. However, you shouldn’t apply for a reverse mortgage, until you understand certain things about how they work. For example, they are the same as home equity conversion mortgages (HECMs,” except an HECM is typically provided by a government agency, such as HUD. Here are other things to understand before you apply for one.

Where Does the “Reverse” in “Reverse Mortgage” Come In?

The first thing to understand is what a reverse mortgage actually is. It is essentially a home loan that pays you, as opposed to one you have to pay back at set intervals. In fact, you will most likely be receiving money from your reverse mortgage lender each month until you have borrowed the maximum allowable amount. That is, unless you choose a lump sum payment or open a line of credit against your home equity. Also, reverse loans are not designed to be paid back right away. They are long-term loan agreements.

How You Can Qualify for a Reverse Mortgage

Being at least 62 is not the only reverse mortgage qualification. You must also be the owner of a home with enough equity to borrow against. You can talk to your lender to determine the current value of your home after all factors are considering, including an existing mortgage, if you have one. A reverse mortgage calculator will then be used to figure out how much of that equity you can borrow against. The reversed-mortgage calculator is a tool that takes government regulations and other parameters into account when determining how much can be borrowed.

Additionally, you must live in your home on a permanent basis to get a reverse loan. You can apply for a reverse loan on a multi-family home, but it can have no more than four units, and you have to occupy one of them. Also, you have to decide if you want your spouse to cosign the loan agreement. If so, he or she must also be at least 62 years of age.

Qualifying for a Reverse Mortgage When You Already Have a Home Loan

If you already have a home loan, you may be wondering if you can get a reverse mortgage. The answer is yes, on two conditions. First, you must meet the other requirements for qualifying for a reverse mortgage. Second, your reverse mortgage lender will require you to pay off the existing loan right away using reverse mortgage funds. Therefore, you must be prepared to receive less spendable money than you otherwise would because that money and other loan fees will be removed off the top.

Repayment of Borrowed Reverse Mortgage Funds

Repayment of reverse mortgage funds will not be expected by your lender for a long time as long as you continue to meet the rules for taking out the mortgage. However, if you violate those terms, the full balance will become due. For example, if you stop using the home as your primary residence, you will immediately have to repay the loan or allow the home to be sold. Failing to pay your property taxes or filing for bankruptcy will also result in immediate repayment being required. If repayment isn’t made quickly, the home may be sold.

Types of Reverse Mortgage Payment Options to Consider

The nice thing about a reverse loan is you have the freedom to choose how you receive your money and how you spend it. For example, if you have a large medical bill to pay during retirement, you can request a large payment. However, if you are relatively healthy but having trouble living comfortably each month on your fixed income, you may prefer monthly installments. A third option is to borrow against your home equity as needed by requesting a line of credit you can borrow against, much like having a credit card.

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