A reverse mortgage is a home loan that lets you borrow money based on the amount of equity in your home. You can get the funds in a lump sum, in monthly payments, or both.
The lender adds interest to the balance you owe on the loan each month, so your equity decreases as time goes on. However, you can withdraw money from your line of credit at any time if you need it.
They Walk You Through the Process
When you choose a reverse mortgage lender, they walk you through the process so that you can get the best loan to meet your needs. They explain the different options, provide you with a list of HUD-approved financial counselors to contact and give you the time you need to make a decision.
Before you decide to get a reverse mortgage, take a good look at your home and finances. Figure out what you need the money for, how much the repairs will cost and how much you can afford to spend each month on living expenses. You’ll also want to know whether you can afford the taxes and insurance on your home.
If you do need a reverse mortgage, ask the lender about their fee schedules. Each lender has its own fees, so you’ll want to find one that has the lowest rates and costs.
Once you’ve selected a lender, they’ll guide you through the reverse mortgage application and closing process. They’ll also make sure you understand the terms of the loan, such as how to pay it back and how much interest you’ll pay.
The lender will need to perform an appraisal of your property. This will be used to determine your equity and the loan amount you can receive. It’s important to find a lender who is familiar with your type of home and will do an accurate assessment.
After you submit the paperwork, you’ll be sent a formal letter of approval or denial from your lender. The lender may require additional documents to complete the underwriting process, including proof of income or home repairs.
You may also be asked to sign a Life Expectancy Set Aside, or LESA, which carves out a portion of the loan benefit for the payment of property taxes and homeowners insurance. This is to reduce defaults due to non-payment of those costs.
Before you close on your mortgage, there’s a three-day right of rescission to cancel your reverse mortgage without penalty. If you change your mind, this can be a great way to get out of the loan and keep your money.
They Work at Your Convenience
Reverse mortgage lenders work at your convenience, making the process of obtaining a reverse mortgage as easy as possible. They walk you through the process, answer your questions and help you understand your options.
They also make sure you’re fully informed on all aspects of the loan before you sign any paperwork. They’ll provide you with a free financial assessment and help you decide if a reverse mortgage is the right option for you.
A reverse mortgage is a type of home equity loan that allows older homeowners to tap into the value of their homes without having to sell them. In turn, the loan provides borrowers with funds that can be used to pay for their healthcare expenses, make home repairs or cover other costs in retirement.
While a reverse mortgage isn’t for everyone, it can be a great way to increase your income during your retirement years and give you more flexibility. Some borrowers use the funds to supplement Social Security or other income, meet medical expenses, cover home improvements and pay for in-home care, says Boies.
You can receive the money from a reverse mortgage as a lump sum, a monthly income or as a line of credit, so you have more choices than with a traditional mortgage. And because the IRS doesn’t consider loan proceeds as income, your reverse income isn’t taxed.
There’s also no monthly payment required during the life of a reverse mortgage. However, you do need to keep up with property taxes, home insurance and any HOA fees. You must also maintain the home to ensure it stays in good condition.
To qualify for a reverse mortgage, you need to be 62 or older and have at least 50 percent equity in your home. You can get a reverse mortgage through the government-sponsored Federal Housing Administration (FHA) HECM program or through a non-government reverse mortgage lender.
Once you’ve chosen a lender, the next step is to complete a loan application. The lender will review your application to see if you qualify for a reverse mortgage and how much you can borrow.
They Give You Time to Make a Decision
If you are considering getting a reverse mortgage, it is important to know that the process takes time. After all, it is a major financial decision that can affect your future. Fortunately, lenders are willing to give you the time you need to make the right decision for your situation.
A reverse mortgage is a type of loan that allows you to convert a portion of your home’s equity into cash or a line of credit. You can use the money to pay for a variety of expenses, such as medical bills, property taxes or debt relief. The money can also be used to enhance your lifestyle and improve your quality of life.
Reverse mortgages are available to borrowers 62 or older, but they must meet certain criteria. The lender will review your income and debts, as well as the value of your home. In addition, you will need to attend counseling to learn about the loan program and understand how it works.
When you have decided that a reverse mortgage is right for you, you will need to sign an application and receive a counseling certification. You may also need to sign documentation about your debts, assets, credit history and liens.
During this counseling session, a reverse mortgage counselor will explain the different options and help you decide which one is best for your situation. They will also provide you with information about other types of loans that may be more suitable for your needs.
Once the application and counseling are complete, the lender will schedule an appraisal of your home. This appraisal will determine the amount of the loan that you qualify for.
The lender will then send you a letter explaining the loan terms and how they work. You can then choose to accept the offer or to cancel it. The lender will then return the loan proceeds, including any fees, closing costs and unused funds.
A reverse mortgage can be an excellent option for retirees with limited income and limited assets. In some cases, it can even be a better option than other types of retirement savings because you won’t have to pay income tax on the proceeds.
They Don’t Scam You
While there are a few scams out there, most reverse mortgage lenders are honest. You should do your research, read testimonials and ask friends for recommendations before you decide to use a reverse mortgage lender.
You should also ask your lender to provide you with a detailed schedule of all fees you can expect, including closing costs, origination fees and any mortgage insurance premiums. This will give you a better idea of how much money you can expect to borrow and how much it will cost you over the life of the loan.
HECMs are insured by the Federal Housing Administration (FHA). This means that if you fail to repay the loan or your home becomes worth less than what you borrowed, FHA will pay the lender back the full amount of the debt through a foreclosure sale.
Reverse mortgages can be a great way for older homeowners to access a lump sum of money to make home improvements, fund a college education for a grandchild or cover health care expenses. But they can also be expensive and can lead to a significant increase in your debt-to-income ratio.
This is particularly true of proprietary (private) reverse mortgages, which can be more expensive than HECMs. It’s important to choose a lender with an excellent reputation in your area and who has been around for a long time.
It’s a good idea to speak with a HUD-certified housing counselor before you apply for a reverse mortgage. This will help you understand all the details of the program and whether it’s right for you.
You should avoid high-pressure sales tactics or anyone who tries to pressure you into signing papers without giving you an opportunity to review the documents. You should also never give out any personal information until you are 100% sure that the company is legitimate.
It’s also a good idea to talk with a tax professional to see how the income from a reverse mortgage will impact your taxes. This is especially important for seniors who are on a fixed income, such as Social Security, and who don’t have a lot of extra money for retirement.