How does the Reverse Mortgage process work?

How does the Reverse Mortgage process work?

A reverse Mortgage is more like a traditional mortgage, this is a loan that is made by a lender to a homeowner while using the home as security or collateral. With the traditional mortgage, the homeowner was is able to use their income to pay down the debt over a period of time. However, when it comes to a reverse mortgage the loan balance grows over time because the homeowner is making any monthly mortgage payments.

Therefore, a reverse mortgage loan typically does not require repayment of the loan until the last homeowner has passed away or has moved out of the property. Consequently, the life expectancy is usually a huge part of the calculation with regards to how much money the borrower will be able to receive. Therefore, in general, the older the borrower is, the more equity you will have for your home and the lower the mortgage loan balance you will expect to receive.

How Reverse Mortgages Work

If you are like most people, you have purchased a home with a regular mortgage. This means that you borrowed money from a lender and that you made monthly payments to pay down the balance, and steadily build equity in your home. This means that over time your debt decreases and your equity increase and you own the home outright.

However, the reverse mortgage works in a different design. Instead of the home owner making monthly payments to the lender, a lender makes the payments to you, this usually based on the percentage of the value in your home. You will have the choice of getting cash in lump sum, regular cash advance, a line of credit or a mix of these options. As the loan progresses, your debt increases while your home equity decreases. When you move, sell the home or pass away, the lender will sell the home and recover the money that they had paid out to you.

How do I get a Reverse Mortgage?

While there are several different types of reverse mortgages available, the Home Equity Conversion Mortgage (HECM) is the most common. These loans are issued out by private banks and insured by the Federal Housing Administration, these are the only reverse mortgage products that are guaranteed by the U.S federal government. These loans usually have no particular income limitations or medical requirements, and there are no limits whatsoever on how the money can be spent by the borrower. The only primary drawback to this particular type of reverse mortgage is that the maximum loan amount is limited. (Currently, it’s the lesser of the appraised value or the HECM FHA Mortgage limit of $625,000. In case you need more information on the reverse mortgage process, you can contact “America Reverse” and get your Free No Obligation Informational Guide.

To qualify for a reverse mortgage you must:

  • Be at least 62 years or older.
  • Occupy the home as your primary residence
  • You should not have any federal debt
  • You need to be capable of making timely and full payments for ongoing property charges
  • Participate in a free consumer information session that will be offered by a HUD Approved HECM Counselor

If you are interested in getting more information about reverse mortgages or need assistance in getting one, fell free to contact us and get your Free No Obligation Informational Guide. At America Reverse, we pride ourselves in offering our clients with the best quality service. Contact us today! Check out what Bill Medley from the Righteous Brothers to say about reverse mortgages.

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