Understanding Reverse Mortgages

With living and medical expenses higher they have ever been before, many senior citizens have a strong case of financial uncertainty. Many hard working homeowners have always dreamed of an amazing retirement, but due to our economic crisis this has caused a major road block in many peoples lives. With a reverse mortgage, the elderly homeowner can take out a loan to help pay for medical expenses or other debts they have acquired.

What exactly is a reverse mortgage?

A reverse mortgage is an FHA mortgage that will only be offered to elderly borrowers. The lender will offer a loan based off the amount of equity the homeowner has built up in the home. this type of mortgage is also not taxable to the borrower and generally does not affect ones eligibility for Medicare SS benefits. This type of mortgage is availble to almost anyone over 62 and is an excellent choice if you are in need of cash.

Who qualifies for this type of mortgage?

Guidelines from the Federal Housing Administration (FHA) require that the homeowner must be at least sixty-two years old to qualify for this type of loan. No credit or income guidelines are going to required, for the approval of this loan. Also, almost every type of home can qualify for a reverse mortgage without having to meet certain requirements. Except for mobile home loans because these must be permanently placed on foundation, established in the past 30 years, and also must pass the FHA home inspection.

How can the homeowner use this money?

The cool thing about this type of mortgage is that the cash can be used anywhere from paying off  old debts to traveling and living their dreams. Below listed are some ways borrowers choose to spend this cash:

-Settling debts they have acquired such as credit card, mortgage, and medical debts.

-Needed home repairs or remodeling

-Traveling

-Hobbies

-Health Care

-Education

-Other

The total amount that can be loaned is based off of the value of the property, interest rates, borrowers age, and the local FHA lending limitations. Younger homeowners are going to receive much less of their equity than older borrowers. Funds for this loan can be received by monthly payments, a lump sum, or a line of credit.

Does this loan require any costs?

A reverse mortgage indeed charges for closing costs and origination fees, but unlike most mortgages, these fees can be paid through the process of the loan.