Considering A Reverse Mortgage? 3 Things You Should Know

For many people, a reverse mortgage can be a very helpful financial tool. A reverse mortgage is a type of loan that allows you to take advantage of the equity you have built up in your home. The term 'reverse' is very appropriate for these loans. Each month the homeowner receives a payment and the amount of the loan grows over time. Homeowners do not have to repay the loan until they leave their home. While reverse loans are a great way to cash in on the equity of the home, there are a few things you should know before applying for one.

Age Restrictions

The first thing that you should be aware of is that there are age restrictions for reverse mortgages. If you want to get a reverse mortgage, you and anyone else listed on the title must be at least 62 years of age. The home must also be the primary residence and the reverse mortgage needs to be the primary lien on the home. Reverse mortgages are best for those who have been in their homes for many years and who have paid most or all of the mortgage off.

There Are Fees

When looking into a reverse mortgage, it's also important to take the fees associated with these types of loans into consideration. Some fees that you will have to pay include closing costs, appraisal fees, loan origination fees, and mortgage insurance. Other costs include interest, property taxes, home insurance, and maintenance. Interest rates can vary from borrower to borrower. You also have the option between fixed rate and adjustable interest rates. Many of the fees associated with reverse mortgages can be paid upfront. However, interest and mortgage insurance costs are typically added in to the loan balance.

They Are Non Recourse Loans

When it comes to reverse mortgages, most people choose to seek them out in their final years. However, sometimes borrowers live much longer than expected. When the borrower dies or leaves the home, it can then be sold to repay the balance on the reverse mortgage. However, since the home itself is the only collateral, if the home sells for less than the remaining balance on the loan, the lender cannot ask the borrower or the heirs for the remainder. Reverse mortgages are non-recourse loans. Heirs also have the option to refinance or purchase the home if they desire. 

Reverse mortgages can be a great way to take advantage of the equity in your home. Before applying for one it's important to know that you have to be at least 62 years of age to qualify for one of these loans. There are also fees and other costs such as closing costs and mortgage insurance associated with these loans. Reverse mortgages are also non-recourse loans. Contact a company, like Senior Mortgage Solutions, for more help.