Facts About Obtaining Reverse Mortgages
If you are of retirement age (62 or older), you may qualify to obtain a reverse mortgage. It is a particular home loan variety available only to those who are of retirement age. Reverse mortgages have several benefits and characteristics that are different from traditional loans. Facts you need to know about obtaining reverse mortgages are listed below.
Reverse Mortgages Will Give You Money as You Need It
The first fact you need to know about reverse mortgages is that when you get one you will not have to pay bits of what you borrow back each month. Instead, you will be receiving money every month from your reverse mortgage lender until you reach your borrowing limit. A reverse mortgage calculator will be used to determine that borrowing limit. Since the federal government regulates reverse loan standards, the reverse mortgage calculator will use a formula that takes government standards and your home value both into account.
Alternatively, you can elect to receive one large reverse mortgage payment. You can also opt to start a line of credit against the value of your home. Then you can take out equity in the form of cash you can spend whenever you want or need. In any case, you will be allowed to borrow money up to a predetermined amount and use it as you see fit for essential or optional retirement expenses.
Traditional Defaulting on Reverse Mortgages is Impossible
Another thing to know about reverse mortgages is you cannot default on one the way you could if you missed a payment on a standard home loan. In fact, part of the terms of reverse mortgages is that you must continuously live in the home to meet the terms of the loan agreement. Therefore, you cannot be evicted. Also, you will not have any monthly bill to pay, which is another reason it will be impossible to trigger a traditional default and eviction process.
Repaying What You Owe on a Reverse Mortgage
A reverse mortgage balance has no repayment requirement in the traditional sense. That is, you will not receive a bill for the mortgage each month. Instead, you can pay it back as you see fit. The only major issue that can cause the full amount to be due at once is leaving your home for 12 months or more. Since you must use it as your primary residence, leaving it for that length of time will void your mortgage contract.
What to Expect if You Void Your Reverse Mortgage Contract
In the event that you leave your home for more than one year your contract will be voided. If that occurs you will owe the full balance due. However, you have the option of not paying that balance. If you do not pay it, your family may choose to. The home will be sold if the balance goes unpaid. You or your family members will receive any money that remains from the sale after the lender takes the remainder of the loan balance. If the balance is not fully covered by the home sale nobody in your family will be required to pay additional money. Nor will any of your other assets be jeopardized.
Undergoing the Reverse Mortgage Application Process
In order to apply for a reverse mortgage you must pass a credit check. Your home must also have a high enough value to make obtaining a reverse loan feasible. It is also important for you and any cosigner you select to live in the home and each be at least 62 years of age. Your lender may also inquire about other mortgages you have. If any exist, you must pay them immediately using part of your reverse mortgage funds when your reverse loan is approved.