So, how you know whether a reverse mortgage is a good option for you? Unluckily, there are many people who simply rush into getting it and regret their decision later. This is because there are many who do not even know what is a reverse mortgage? It is a type of loan that can simply reverse the life of an individual either for the better or the worst.
What is Reverse Mortgage?
It is a special loan that gives older homeowners the flexibility of borrowing money against the assets or the equity in their homes. The name is due to the fact that instead of having to make payments to the lender, the borrower of this type of loan actually gets money from the lender. Interest on this loan gets accumulated on a monthly basis until the loan amount equals to the amount of assets or equity that the home corresponds to or is made up of. It is to be noted that not every individual is eligible for this.
What are the Eligibility Criteria?
The age of an individual is one of the most important eligibility criteria for a reverse mortgage loan. It is necessary for you to be minimum 32 years of age in order to qualify for a reverse mortgage. Your home should be your primary residence and it is also necessary for you to have paid off all or some of your traditional mortgage. The amount of money that you can actually borrow is also limited. Thus, if you owe a huge amount of money or an amount beyond a certain line on your traditional mortgage, you might not be eligible for it.
How to Get Reverse Mortgage?
You need to follow a very simple procedure in order to get this type of loan. The FHA or Federal Housing Administration provides such loans by way of its HECM or Home Equity Conversion Mortgage program. The counselors or the lenders should be approved or certified by the Department of Housing and Urban Development. It is important for you to meet a counselor or a lender in person for discussing the procedure and the amount that you will have to pay for getting it. Your lender or counselor will inspect your home for getting an idea about whether the house is properly managed or not. This way you will be qualifying for the loan provided your house is properly managed.
Important Facts about Reverse Mortgage
It exactly means that you are selling your house to someone else. This means that the money you die or leave the house, someone else living in the house will naturally be evicted. This can either be your family members or your spouse. However, this can be avoided by signing those people or family members as co-borrowers provided they are minimum 62 years of age. Experts are of the view that you need to put in good thought prior to going for this. Instead of making use of your home assets, you can check whether you are eligible for a local or state program for lowering your bills. You also have the option of going for a more affordable house. Home assets should always be your last resort to be used during financial emergencies.
It is always advisable to have a word with a qualified counselor prior to going for a reverse mortgage.