What You Need to Know about Reverse Mortgage Loans
If you’re retired or are thinking about retirement, your financial support is likely a common thought. Perhaps you are confident in your retirement savings, or perhaps you aren’t. Either way, reverse mortgage loans may be of interest to you.
What Are They?
Reverse mortgage loans are available to homeowners above the age of 62 years. These loans allow elderly homeowners to convert part of their home equity into cash. In other words, it permits homeowners to use the wealth already invested into their homes to help pay for necessities like healthcare or basic living expenses, which is especially helpful if retirees have a limited income. These loans are called “reverse mortgages” because the lender makes payments to the borrower, as opposed to the traditional loan, which has the borrower make payments to the lender.
Requirements of You and the Loan
For this type of loan, both you and any co-owner of your estate must be above the age of 62 years old. You also must not have any existing traditional loans that you are still paying towards. As a borrower, you are not required to pay back reverse mortgage loans until you no longer live in your home. So long as you live in your house, the loan balance does not need to be paid. As a borrower, though, you must pay your homeowner’s insurance, current property taxes and, if applicable, homeowner’s association dues.
Things to Consider
Reverse mortgages sometimes get a bad reputation in the media, but often this is because they are not fully understood or used properly. These loans are regulated and insured by the U.S. Department of Housing and Urban Development. To clarify, though, these loans are not government loans and are issued by a private mortgage lender. You should also know that these loan fees are similar to other mortgage products, but with one additional fee: the Mortgage Insurance Premium. This premium is applied to protect you against the loan balance exceeding the value of your home.
If you’re interested in reverse mortgage loans, investigate them further and determine if it’s right for you. These loans have the potential to be a solution to the societal problem of seniors not having enough money to get through their retirement years. But this type of loan may not be for everyone, and it’s up to you to decide whether or not this option could work for you.