To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older. Thus it is usually retired people who consider getting reverse mortgages.
A reverse mortgage is a loan against your home that you need not pay, for the time that you are living there. Only when the home has been sold or you cease to live there, does the balance of the loan become payable. No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home.
Reverse mortgages can convert home equity to cash
With a reverse mortgage, the home owner can convert the value of the home that is the full or part ownership they have in their home into cash as a lump sum amount or as regular monthly cash advances. The cash you get from a reverse mortgage can also be paid as a "creditline" account that lets you decide when and how much of your available cash is paid to you.
To make sure that a reverse mortgage does not become a debt, the outstanding balance of the loan will at all times remain lesser than the value of the home. In the event that the balance of the loan has gone beyond the value of the home, the homeowner will not be forced to move out or sell his home. At the same time, the lender continues to remain insured.
Qualify for a reverse mortgage
To qualify for a reverse mortgage as mentioned above, the borrower must be at least 62 years of age and should have little or no outstanding mortgage balances. The equity available is based on the homeowner age and the value of the home.
Reverse mortgage rates
Just like in the case of regular mortgages, reverse mortgages are also subject to fixed or adjustable interest rates and also carry the similar payment of various closing fees. However, unlike the standard mortgages, in the case of a reverse mortgage, the lender, a bank or traditional mortgage lender may provide for the financing of any applicable fees.