Homeowners may have known about reverse mortgages from their family members, colleagues, friends and on the television. This type of mortgage includes the Home Equity Conversation Mortgages (HECMs) which is backed by the government. Reverse mortgages are home loans that let elderly people access a part of the equity of their home without paying mortgage payments every month. Those who will take out this loan should pay property taxes, home maintenance and homeowner’s insurance. If you want to be sure if a reverse mortgage is right for you, you should know as much information as you can about the loan.
Knowing the Benefits of the Loan
You can answer this question by examining the features of a reverse mortgage and if they can benefit you. For a lot of seniors who own a home, such features can be beneficial. These features include:
- Accessibility to home equity. Having the access to funds from your home equity is an excellent feature that makes a reverse mortgage an attractive loan product. You can use the funds in paying off bills and other obligations.
- Using equity while maintaining ownership of the home. Unlike a home equity loan, a reverse mortgage allows you to stay in your home for as long as you want while enjoying the funds from your equity.
- Freedom to use the funds for anything you want. You may have your reason for taking advantage of your equity such as paying off credit card bills, medical expenses and travel expenses. But you can also choose to open a line of credit for emergency purposes.
Qualifying for the Mortgage
To qualify for a reverse mortgage, the youngest borrower on the title should have reached the age of 62, lives in the house as his main residence and has enough home equity. The amount you can get from your home equity is based on the calculation by the Federal Housing Administration which considers the youngest borrower’s age, the property’s current value, the balance of existing mortgage loans and the interest rates.
Knowing If you can Afford the Mortgage
As with any mortgage loan, a reverse mortgage loan comes with closing costs and requires you to continue to pay the homeowner’s insurance, taxes and basic home repairs. Make sure you afford such requirements. In case you are not sure how to calculate your ability to afford such obligations, use a mortgage calculator or consult with a mortgage professional.