Reverse Mortgages — Does Age Matter?
Older borrowers can get a larger loan than younger borrowers can. However, it’s important to remember that if an older borrower excludes a younger borrower from the loan, then in the event of their death the younger person would have to vacate the property.
This would be in the case of a pending divorce or other action. The good news is that a younger spouse under the age of 62 is allowed to be a part of the loan and remain in the property should the older spouse pass on.
There are several payment options so, let’s talk about this part too.
First, a lump sum.
If you want to receive the money in one lump sum, you can do so and know that not all the funds are available in the first year. A portion is held in a Line of Credit and is available to be accessed after the first year.
Then, you can have regular payments.
Some people prefer to receive regular payments instead of risking spending a lump sum. They can last for a period of time, or the rest of your life depending on what suits you and what you qualify for . This is ideal for people that want long term security of monthly payments to supplement income.
We have the option to receive funds through a line of credit.
If you want extra money but don’t necessarily want to access it, then choose a line of credit payment option. You don’t have to pay interest unless you spend any of money available to you and the money left in the Line of Credit is accruing interest and compounded monthly. These loans are insured by HUD and this is an amazing way to grow the funds available to you over time.
You can also choose a combination of all three choices by speaking to your provider.
Next we want to talk about repayments as this is something that has been confusing over the years.
There are no monthly repayments with reverse mortgages. You pay back the money when you move out of the home or if you pass away and there is no Pre-payment penalty. You can make payments toward the loan if you should choose to do so but that’s not really the reason for this home loan type. In addition, if the terms aren’t met, then you may be required to repay the loan if either of these events occur.
Terms are defined by not paying property tax, insurance, or you move out of the home and it is no longer your primary residence.
In most cases, reverse mortgages are paid off when the home is sold. If you choose to move to a smaller home, then you can keep the equity from the sale of your home that remains after the cost of buying the next home. If your heirs want to keep the home, then they will need to cover the cost of the loan in full.
You can use a Reverse Mortgage to purchase a home as well.
There are some basic requirements for a reverse:
If you want to apply for a reverse mortgage, you need to know what the minimum requirements are:
— The primary borrower must be 62 years of age or older.
— If you have any government debts, you must pay them regularly.
— There must be sufficient amount of equity in your home.
— You must have enough income to be able to take care of the expenses of the home such as property taxes, insurance, association dues, utilities and repairs and meet a minimum residual income amount
Before you start the loan process, you will have to complete an information session with an HECM counselor. They will discuss whether the loan is right for you and answer questions you have.
Reverse mortgages can offer you a better quality of life, but you should consider whether they are right for you in the long-term.
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