Reverse Mortgage Information
If you are reading this, then you probably want to know what is a reverse mortgage and how does it work? A reverse mortgage is a loan that is given to home owners in which your home is the collateral against the loan. Reverse mortgages are usually taken out by older homeowners who are looking to get some income from their home.
To qualify for a reverse mortgage you must be at least 62 years old and a homeowner. You may have an existing mortgage on your home, but it must be small enough that your reverse mortgage can pay it off. You do not need a good credit score or proof of income, because you are not expected to repay the loan with cash. The money you get from a reverse mortgage is not taxable. Before you enter into an agreement with a loan company, you are required to take a counseling course so that you are informed on your decision to take out a reverse mortgage.
Reverse mortgages do have a maximum, which is currently set at $625,500. If you own a home that is worth more than this amount, jumbo loans are available. These loans are not insured by the FHA and usually come with higher fee schedules. Lenders use the borrowers age to determine the size of the loan they are willing to give. They also use the value of the property, current interest rates, and the payment method in calculating the loan amount. Some borrowers are given the option of taking a lump sum while others take monthly installments.
Reverse mortgages are more costly than a typical home mortgage. Fees can range from $4,000 to $9,000 and are mostly determined by the home's appraised value. There are typically monthly service charges on the loan that are usually around $25-$35 and a premium of 1.25% of the mortgage value is also assessed. Interest rates on reverse mortgages will vary from lender to lender. Many reverse mortgages have variable interest rates, although some do carry a fixed interest rate over the life of the loan.