You may have already heard about the reverse annuity mortgage however, that term describes one of five options for senior mortgages that senior homeowners can choose from.
Senior Homeowners 62 and older, who have little or no mortgage balances remaining, and are currently living in the home are eligible to participate in the HUD reverse mortgage loan program. While commonly called a reverse annuity mortgage With the HUD reverse mortgage loan, seniors are allowed to borrow against the equity in their homes. Seniors can select from five payment plans:
• Line of Credit – stops your mortgage payment, and you have access to money if and when you want it.
• Tenure – equal monthly payments for as long as one borrower lives occupies the home as a primary residence.
• Term – equal monthly payments for a scheduled number of months decided.
• Modified Tenure – mix of regular monthly payments and line of credit
• Modified Term – mix of term monthly payments and line of credit
What is the difference between a conventional mortgage and a reverse mortgage?
As the name implies, a reverse mortgage is just that essentially, a reverse mortgage allows the homeowner to be paid for the equity already owned in the home. On the other hand, a conventional mortgage, the loan value decreases over time and the amount of equity the homeowner has increases accordingly. This means that a reverse mortgage allows the homeowner to remain living in their home while still receiving a monthly payment. This is particularly useful for senior citizens, who are retired and possibly in need help covering medicals costs, food, utilities and other living expenses.
How a homeowner can qualify for a reverse mortgage?
To be able to apply for and receive a reverse mortgage, there are certain criteria that you must meet.
You are eligible for a reverse mortgage if you meet the following qualifications
All the owners on the deed of the home apply and sign the required paperwork
You are (and your spouse) are 62 years or older
You are the property owner and have equity in your home
You reside at the property
You do not have federal debt outstanding or unpaid
You participate in a session on consumer information by an approved Home Equity Conversion Mortgage (HECM) counselor.
How much money can a homeowner receive from a reverse mortgage?
Every reverse mortgage situation is unique and there are a number of factors that will affect the amount of money you can receive from taking out a reverse mortgage. There are also many different lenders, with a variety of programs to suit your specific needs. Some of the factors taken into consideration include the value of your homes equity, the type of payments you choose to receive (monthly payments or a lump sum amount), as well as which lender and program you choose. The amount of money you receive is also dependent on your age at the time of completing the loan (usually, you will receive more money if you are older) and the equity that is available on your home. This particular factor has a great impact on the amount you will receive the more equity there is in your home, the greater the amount you will receive.
Are there different types of reverse annuity mortgages?
Yes, just like traditional and conventional mortgages, there are a number of different reverse mortgages that are offered by both government agencies and companies. All have their pros and cons, so you need to choose the best program to suit your needs and budget.
Of the reverse mortgages offered, those offered by private companies can be the most expensive. These reverse mortgages, however, also come with fewer restrictions on how money can be distributed and dispersed.
Reverse mortgages offered by the federal government are known as federally insured Home Equity Conversion Mortgages (HECM). This is one of the cheaper options for reverse mortgages the cheapest usually being reverse mortgages offered by state and local governments. Although these institutions offer the least expensive reverse mortgages, their programs often involves more rules and restrictions than do the other types.
How does the homeowner repay a reverse mortgage?
Of course, your reverse mortgage loan will need to be paid off at some point in time. There is three main ways through which a reverse mortgage is usually paid. These are:
The selling of the property y the owner
The death of the home owner
The property owner leaves the property.
If you are a senior home owner, but in need of extra money to pay your daily living expenses, a reverse annuity mortgage could be the solution for you. To find out more, contact a member of the National Reverse Mortgage Lenders Association to see if you are eligible, and ask for a list of HECM counselors today.
