While many people are familiar with the concept of the traditional mortgage, many people are unaware of what a reverse mortgage is. Essentially, it’s a loan for senior citizens that allows them to get tax-free income from their home’s equity.
A reverse mortgage means that the lender pays off the owner of the property, unlike the typical mortgage where the lender has to be paid by the person living in the home.
How A Reverse Mortgage Works
In most cases, homeowners that qualify for the reverse mortgage won’t be able to get paid for the total value of their property. This amount is called the principal limit and depends on how old the youngest borrower is, the current rate of interest, property value as well as the HECM mortgage limit. Depending on how old the borrower is, how low the interest rate is at the time, and the property’s value, you can get a better principal limit. For a variable rate HCM, you have:
As long as one of the borrowers is using the property as their primary residence, you receive monthly payments, as well as ahead of time payments for a specific number of months as per agreement. A fixed-rate HCM provides you with lump-sum payments.
Reverse Mortgage Requirements
To apply for a reverse mortgage, the primary house owner needs to be 62 or older. There are other conditions, however:
- You must own the property outright or have one primary lien.
- If you have a mortgage, you must use the money from the reverse mortgage to pay it off.
- You need to live in that property as a primary residence.
- Legal obligations such as property taxes, homeowner’s insurance, and association dues need to be taken care of.
- You must take good care of the property and ensure that it’s in a good state.
- It has to be a single-family home, built after June 1976.
A reverse mortgage can be an excellent way for senior citizens to make some money back from the property that they’ve taken care of for so long. If you’re considering Reverse Mortgage Payoff Loans, you should work with a residential loan advisor and mortgage lender. Terry Nance is a California mortgage expert, mortgage loan officer, and reverse mortgage loan specialist, educating and assisting people with all their mortgage and reverse mortgage queries and concerns.
You can reach out to him for all your questions and he’ll sit you down to explain all the details.