What is a Reverse Mortgage?
When you hear the word mortgage the first thing many people think of are traditional mortgages for buying or refinancing a home. Traditional mortgage loans are used to purchase property or to borrow money against the equity in your home. The borrower and lender come to an agreement that the borrower will pay back the borrowed sum of money plus interest in an agreed upon time window until the borrower is able to pay off the loan.
In contrast, a reverse mortgage is a loan that allows a homeowner to borrow money utilizing the equity in their home where no payments are made monthly. Unlike traditional mortgages, reverse mortgages do not involve monthly mortgage payments back to the lender. Instead, the lender will pay the borrower a lump sum, monthly payments, or a line of credit to the borrower collateralized by equity in the home. The borrower will retain title to their home and the reverse mortgage loan will be paid back upon selling the home, leaving the home as a primary residence or if the borrower passes away. If married and one spouse passes away, the other spouse can stay in the home until they vacate the property.
What to Look Out for…
While reverse mortgages can be a very smart decision for the educated homeowner, they can be complicated and have been an area where scammers have taken advantage of retirees looking to make ends meet. It is important to work with upstanding lenders or brokers like 101 Loan that have experience with this type of mortgage and a proven track record as evidenced by their online reviews (yelp and google) and by professionals like financial planners, tax planners and estate planners that refer clients to reverse mortgage experts like 101 Loan.
How does a Reverse Mortgage work and How does one Qualify?
Traditional mortgages that are called “Forward mortgages” require monthly payments all with the premise that the loan will eventually be paid off in a given period of time in the future. Reverse mortgages don’t require monthly mortgage payments and as a result accumulate interest over time with the mortgage balance growing each month as payments to the mortgage are not paid.
In addition, there are qualifying conditions the borrower must meet to qualify for a reverse mortgage. First and foremost, the property that will be used for the reverse mortgage must be their primary residence of the borrower and have at least 50% equity in the property. Next the borrowers must be at least age 62 to qualify and have some lever of residual income to afford such costs as home insurance and property tax. (There are exceptions to this)
Types of Reverse Mortgages
The most common type of reverse mortgage is known as a home equity conversion mortgage or HECM. HECM’s are insured by the Federal Housing Administration and have an upper loan limit set by the FHA.
Jumbo reverse mortgages are necessary for borrowers looking to borrow more than the HECM limit. There are also single-purpose reverse mortgages which are a reverse mortgage in which the funds are used for a specific purpose, for example home upkeep or maintenance projects. Proprietary reverse mortgages are similar to a HECM. The major differences are that proprietary reverse mortgages are secured through private lenders and are not insured by the FHA. For more info, see our Reverse Mortgage page.
How can Rob McCarthy @ 101 Loan help?
If you are looking into a reverse mortgage for the purposes of freeing up cash, paying off outstanding bills, covering future expenses, or any other reason you deserve to have assurance that you are getting the best deal possible. If it’s your very first time learning about what is a reverse mortgage, you will quickly learn small differences in rates, loan amounts, or loan conditions will make significant differences in your future finances. Rob McCarthy and the team at 101 Loan are reverse mortgage experts and have a long track record of supporting their clients to find the best reverse mortgage for their unique situation.
Working with 101 Loan, you will have the opportunity to meet with a lending professional who will break down the type of reverse mortgage that will fit your specific goals and needs. They will then go to work gathering information through their connections with over 50 top lenders to make sure they are able to find the lowest possible rates and fees for your reverse mortgage. Finally, they will provide you with an easy to understand document that details your various loan options, rates, costs, amortization schedule and next steps to move forward. All through the process, 101 Loan will be there to answer any questions you might have to ensure you have the peace of mind you deserve.
There are many different options and possibilities when it comes to finding the reverse mortgage or any mortgage that is right for you. Having 101 Loan walk alongside you will take out the guesswork. 101 Loan also offers a full suite of services including Purchasing, Refinancing, Reverse Mortgages, and Commercial Loans.
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