How Reverse Mortgages Function
Typically, those whom are pending soon-retirement, are already retired,
or are at least 62 years old with a substantial--if not fully paid
home-mortgage--will consider a reverse home mortgage as an added income
or type of emergency fund.
A reverse mortgage, although seemingly dynamic in its costs and fees
associated with it, is not ordinarily a tough concept if you're willing
to do the research and conceptualize the purpose.
A reverse mortgage is essentially a contract between you and a
lender - typically approved by the Home Equity Conversion Mortgage
(HECM)--and endorsed to be insured by the FHA or Federal Housing
Administration. Such a contract or agreement entailing that you wish and
have elected to receive a lump sum or monthly payments reflective - to
whichever extent - of your current homes equity (or amount already
While typically such loans or 'reverse mortgages' are reserved for those
whom which have already paid off their home in entirety, it has been
provided to those with 80% or more home-equity in the past. There are
also limitations on the maximum amount in which you can receive in the
form of a reverse mortgage, so ensure you plan ahead and read any and
all fine print - or have someone on your behalf, such as a legal or
financial advisor do so.
It's worth noting both mortgage lenders and consumers alike pursue and
are more comfortable receiving a reverse-mortgage through the HECM, as
they're more 'regulated' in costs, fees, and other financial trends - as
well as the fact that they are insured or protected by the Federal
Housing Agency should the mortgage turn upside-down or the agency you
borrowed from go out of business. In other words, you'd be guaranteed to
continue receiving the reverse mortgage payments if you, for example,
elected for an MIP (mortgage insurance premium), also known as mortgage
insurance. Should you elect not to apply for or receive an HECM-based
reverse-mortgage you might easily face much more stringent
requirements - or looser - but yet at an increased cost or otherwise
Before signing away your homes equity, be aware of the possibilities of
loan origination fees, third party charges, and any other (excessive)
fees that might be associated with the agreement.
It's also noteworthy to point out that those over 62--ironically
enough--the younger they are, forward from this age, the more likely
they are to be 'cut a better deal' - to include lower interest rates,
payments, and so forth--although not to contradict or escape the reality
that while some costs might go down, others might rise.
Those whom own a condominium and have paid it off in full or have
substantial equity in the property, barring it's approved or recognized
by the designated federal agencies and is within your rights as a lien
holder to sell, may also apply for a reverse mortgage.
Lastly, like many loans or lines of credit, such a loan presented as a
'reverse mortgage' is likewise contingent upon your credit report,
current income (to debt ratio), and that you don't currently have any
existing federal debt.
Click Here for the Reverse Mortgage Calculator.