If you are thinking about taking out a reverse mortgage on your home, you need to make sure you know everything about these loans and what exactly will happen with your home and money. Here are some very important things to know about a reverse mortgage before you decide to sign the papers.
First, there are certain requirements you have to meet in order to qualify for this type of mortgage. You must be at least 62 years old and own your home. You can have a very small mortgage, worth 10 percent or less of the value of your home but you can’t have a large mortgage still outstanding on the home. Also, the home you use for the loan must be your permanent residence in which you reside. It can’t be a rental home or a vacation home.
A reverse mortgage doesn’t have to be paid back until you sell your home or you die and then your estate has to pay the loan. There are no payments due at a certain time during the time you live in the home but the longer you have the loan, the more interest you acquire on the mortgage. This is why a lot of people try to pay back the mortgage as soon as possible so that they don’t end up having to pay a large sum of money in interest when they go to sell their home.
The amount of money you can borrow from a reverse mortgage depends on a few different things. It depends on how old you are, as the older you are, the more money you can usually borrow. It also depends on how much your house was appraised for. You can never borrow more money than what your house is worth when you take out the loan. Lastly, it is also based on the current interest rates as well. There are loan calculators that can give you a general idea of how much money you can borrow but the exact number will come from a HUD specialist who handles your loan.
Lastly, make sure that you only apply for the mortgage with a HECM lender who has to follow all the HUD rules. Don’t use a lender who is not HECM qualified as it may be one of the many reverse mortgage scams that are out there. Be careful and do your research before using any type of lender of financial advisor when applying for a reverse mortgage. You don’t want to end up losing money or having your money stolen because you get involved in a scam.
When it comes to applying for a reverse mortgage, if you have any questions you can always call U.S. Department of Housing and Urban Development (HUD) and they can help you through the process and provide you with all the information you need.