How Does a Reverse Mortgage Work - The Key Points
Not quite sure how a reverse mortgage works. Consider this -
1. You must be at least 62 and if there are two people on title, the younger of the two must be at least 62. Generally speaking, the older you are and the more valuable your home is will yield you the most funds. Your existing mortgage balance and the prevailing interest rates will also have an impact on the amount of funds available.
2. Take the time to learn about these mortgages. Typically there is no repayment as long as you live in your home. When the last living borrower dies, sells the home or moves — the loan must be repaid.
3. The lender will provide you with a loan in an amount ranging from 20-60 percent of your home’s equity. In return, the lender will receive a portion of your home’s value when you die or sell the home.
4. Borrower’s are responsible for property taxes, insurance, home repairs and homeowner dues if applicable. You could be in default if you fail to meet those responsibilities.
5. You can receive your funds in three ways: lump sum, regular or quarterly installments, or as a line of credit you can access as needed.
6. If you own your home outright or nearly so, a reverse mortgage can be a big financial help at a time in your life when you could really use the extra funds. If you still have a substantial mortgage obligation, it will need to be paid off and it will impact how much of a reverse mortgage you can obtain.
7. Avoid signing any service agreements with individuals who promise to help you locate a reverse mortgage lender or apply for a loan. Free or low cost help is available by calling HUD’S toll-free Housing Counseling and Referral Line at 800.569.4287.
8. Know your neighborhood values. Even though a reverse mortgage whittles away at your equity (that’s why you’re not making payments) you could benefit from rising home values where you live. In the case of a declining market — remember that you will never owe more than what your home is worth. A nice safeguard.
9. Another good publication to read is AARP’s “Home Made Money” — a handy consumer guide to reverse mortgages. Call 800.209.8085 to order your free copy.
10. Whether or not you have a great experience securing a reverse mortgage or less-than-great … the lender you chose can make all the difference. Consider Karen Barton, reverse mortgage consultant from Denver, Colorado … the more you get to know about her, the more you will realize her uncompromising commitment to getting you what you want in an enjoyable and professional manner. Karen can be reached at 720.641.3482 to learn more about what is a reverse mortgage and how to avoid the disadvantages of reverse mortgage.