When one hears the term reverse mortgage, words such as retirement, credit, and deferring loan payments come to mind. Others refuse to dive into this particular mortgage, due to its complex nature and possible complications.
But these reverse mortgages are simpler than you think.
Defining reverse mortgages
A reverse mortgage provides individuals with income they can use during their retirement. This loan is usually offered for senior citizens aged 62 years and older. One advantage of reverse mortgages is the irrelevance of borrower’s credit. It is often unchecked because borrowers need not make more payments.
Homes serve as collateral in this type of mortgage. After the borrower’s death, these homes are sold in order to repay the mortgage. Other options involve the borrower’s heirs repaying the mortgage without selling their homes.
Eligibility for reverse mortgages
The Federal Housing Administration (FHA) requires applicants and borrowers on the deed to be at least 62 years of age or older. Borrowers should also meet the financial eligibility criteria established by credited lenders.
Homes should also pass the eligibility requirements issued by the FHA. Homes with current mortgages are not allowed. Borrowers should pay everything with the proceeds from the reverse mortgage loan. Home types allowed by the FHA are the following:
- Approved condominiums
- Single-family homes
- Two to four unit owner dwellings
- Manufactured homes
The mechanics of reverse mortgages
After years of paying your mortgage, you build up equity (the amount of your property today minus the amount you owe on your mortgage and other lines of credit). Reverse mortgages allow borrowers to use money against their equity.
As the years pass, your loan balance grows. You are not required to pay the loan while you or your spouse lives in your home. When both of you pass away or move out of the house, someone should pay for the loan. Majority of individuals need to sell their house to pay for the loan. Fortunately, neither you nor your heirs will have to pay back more than your home’s current worth.
If you say yes to reverse mortgage loans, save money by borrowing less and gradually. Make the most out of your mortgage by knowing the basics.
Here at Altius Mortgage Group, we offer trusted reverse mortgage loans in Utah. Get pre-qualified now or contact us for more information on our other services.