What Everyone Should Know About Reverse Mortgage Lenders
Are you an American or U.S. citizen who is age 62 or older in need of financial assistance? Well, if you have a lot of equity in a home you own as your primary residence, then services offered to you by reverse mortgage lenders might help you in this time of need.
See, reverse mortgage lenders who are in the business of writing reverse mortgages can help you convert some of the equity you’ve built up in your home into cash. And the good news is that you will be free to stay in your home for as long as you live, or until the home ceases to serve as your primary residence.
How Reverse Mortgage Lenders Work
Reverse mortgage lenders provide financial vehicles that function like normal mortgages. However, unlike a typical home mortgage loan, reverse mortgages pay money to you, the borrower, without you having to pay the money back for as long as you live in your home.
The key component to reverse mortgages and paying them back is that the loan is paid back to reverse mortgage lenders when you sell the home, or when the last living homeowner dies. Payment can also be triggered if your home ceases to be listed as your primary place of residence.
These mortgage programs are great sources of financial relief for home owners who have spent their hard earned money and time building up large equity positions. You can improve your quality of life and not have to worry about paying back the loan as long as you live in the home and maintain the home’s property taxes and home owners insurance.
Qualifying to Work with Reverse Mortgage Lenders
If you own your home, have a large equity position in the home, and are age 62 or older, then it is very likely that you can qualify for a reverse mortgage loan. The money you receive from the reverse mortgage comes to you tax free, as it is not counted as income. As always, be sure to talk with your tax professional to make sure you are covered in this area.
Three Kinds of Reverse Mortgages
There are three kinds of reverse mortgages – single purpose, federally insured (also called Home Equity Conversion Mortgages or HECMs), and proprietary.
Single purpose reverse mortgages are best for home owners who do not have a lot of money for upfront fees and preliminary costs normally associated with reverse mortgages. The trick here is that single purpose loans are very limited in terms of how the funds from them can be used. Reverse mortgage lenders who issue these types of loans set the guidelines for whether the loan must be spent to repair specific damage to the home, to pay property taxes, or perform some other set goal.
Home Equity Conversion Mortgages (HECMs) and the lesser used proprietary reverse mortgages (which are private mortgages) run much higher in costs to the borrower upfront than do single purpose reverse mortgages.
By far, HECMs are the most frequently utilized kind of reverse mortgage. Their high upfront costs dictate that you should know whether you will be spending enough time in the home after you take out the mortgage to justify taking it out in the first place. The idea time frame you set should be longer than three years and preferably five year.
Knowing the Facts About Reverse Mortgages
You are not allowed to enter into a contract with reverse mortgage lenders without first meeting in person or talking on the phone with a independent, registered and government approved housing counseling agency.
The purpose of this interview is to make sure that you, as the mortgage borrower, are fully informed about the different fees, costs, and the nature of the reverse mortgage you are seeking to take out. This counseling service must be very clear about any possible negatives associated with your reverse mortgage, and you must also be informed about any alternatives that might exist to taking out this type of loan. Once you have gone through your counseling session, your reverse mortgage lender will be issued a certification that you’ve completed it – allowing you to move forward with the loan process.
As with any mortgage or loan product, you must take your time and be very careful about making a final decision. As reverse mortgages deal with individuals who are in the later stages of life, it’s a good idea to consult with remaining family members to be sure they understand what it is your are planning to do.
Once you’ve made the decision to move forward with this type of loan, there is any number of reputable reverse mortgage lenders for you to choose from. Call around, as rates and terms may be better from one lender to the next.