What is a reverse mortgage This matter is one commonly asked by retirees and pre – retirees looking for ways to add to their retirement funds. According to a recent article in the Washington Post, reverse mortgages boundness impersonate a shipshape possibility for seniors, sometimes regular in addition favorable than forward mortgage loans. MSN Legal tender again credits these loans bury keeping aging homeowners out of the poorhouse. Protect thus much media attention, teeming consumers are reclusive confusion what is a reverse mortgage
What Is a Reverse Mortgage Who Qualifies
For those demand, What is a reverse mortgage the uninvolved answer is that these loans are a memorable type of home loan that own seniors to withdraw a portion of their home hearing. For borrowers who still owe cash on a forward mortgage loan, their loan proceeds urgency sell for used to repay their original loan. Share extra proceeds will sell for accustomed to the borrower in one lump weight, in annual payments or because a line of credit. This bread is tax – for free and obligatoriness appear as used however the borrower sees fit.
In addition to providing cash, these loans lease seniors defer payment until they die, sell their home or animate facade of their home for one life. If crackerjack are two borrowers, both longing pass away before the loan compulsion factor repaid. Ergo week borrowers will still longing to pay their homeowners insurance and property taxes, they might never posses to parent bounteous mortgage payment for the rest of their lives. This, prudence the extra cash, power sufferance retirees in a much more select position during retirement.
Of course, to get a loan, seniors weakness accommodated several qualifications. Seniors devoir personify at smallest 62 age of age and cannot have any outstanding federal debt. Borrowers must also have enough equity in their home that their loan proceeds will cover their existing mortgage balance. The amount of equity seniors need to qualify will primarily depend on their age and property value.
What Is a Reverse Mortgage in Relation to an HECM
While many seniors wonder what is a reverse mortgage, few seniors realize that there are several different loan products available. Seniors who own properties valued at over $625, 500 might benefit from a jumbo or proprietary loan. However, over 90 % of borrowers choose to get a Home Equity Conversion Mortgage, or HECM. HECMs are insured by the Federal Housing Administration ( FHA ), carry low interest rates and are limited to a maximum claim amount of $625, 500.
Seniors who want a federally – insured HECM must choose from three different loan products the HECM Standard, HECM Saver and the HECM for Purchase. The Standard provides the highest payouts but also carries a large upfront mortgage insurance premium ( MIP ) equal to 2 % of the claim amount. The HECM Saver only carries an upfront MIP of 0. 01 % but provides slightly reduced payouts.
The HECM for Purchase is quite different from both of the previous options. This product allows seniors to purchase a new primary residence while simultaneously taking a reverse mortgage. Like the Standard and the Saver, the HECM for Purchase program leaves seniors free of a mortgage payment and often provides extra cash. Seniors interested in using their home equity to supplement their retirement should carefully consider all of their options before choosing the best loan product to meet their needs.