Many people never even heard about reverse mortgages, but with age and less income as retiree reverse mortgages become more desirable.
A reverse mortgage is also known as lifetime mortgage which is a loan financing available to seniors only. The loan is use to release the home equity of the property as one lump sum or multiple payments. The homeowner's/borrowers obligation to repay the loan is deferred until the owner past away, the home is sold. For a conventional loan borrower makes a monthly amortized payment to the bank and after each payment the equity increases within the property, and typically after the end of the term (e.g., 30 years) the mortgage has been paid in full and the property is released from the lender. A reverse loan works apposite, the borrower makes no payments and all interest is added to the lien against the real estate. The borrower receives monthly payments.Since the First Reverse Mortgage Loan was issued in 1961, reverse mortgages have become more popular and has steadily risen throughout the past years.
Reverse Mortgage Products - There are 3 Reverse Mortgage products on the market today.
Home Equity Conversion Mortgage is the oldest and most popular product from the Federal Housing Administration, a division of HUD. Fannie Mae, Home Keeper Private Institution Lenders issue products for higher valued homes. HUD CounselingAll HECM borrowers must receive independent third-party counseling. HECM counselors will discuss program eligibility requirements, financial implications, alternatives to obtaining a HECM and provisions for the mortgage becoming due and payable.
Borrowers’ requirements & mortgage amounts
Age 62 years or older, based on age of the youngest borrower You must own your property and occupy the property as primary residenceParticipation in the HUD Counseling Mortgage amount is based on lesser appraised value for FHA insurance limit.Interest rates based on current status and no repayment required as long as the property is primary residence. No income or credit specifications are required for the owner