Monday, March 7, 2011

What Is A Reverse Mortgage And Is One Right For You

Are you sixty-two or older? Are you worried about your monthly income in today’s economy? If your answer to these questions is a resounding – or even whispered – “Yes,” then maybe it’s time to look at taking out a reverse mortgage on your home.

Maybe you’ve heard of a reverse mortgage before, but you aren’t sure what it means. Well, the financial definition is that a reverse mortgage involves a lender paying you a portion of your home’s equity until you stop living there. In laymans’ terms, you’ll receive either one lump-sum payment or a check every month related to the value of your home, until you (or your heirs) sell the house, you pass away, or you are otherwise not be there for an extended period of time. The amount of money you receive depends upon your age, the value of your home, and current interest rates, and this money is tax free, since it’s a conversion of your own capital – you’re essentially borrowing from yourself. Also, when the house is sold, you or your heirs will receive the proceeds, minus the fees, interest incurred, and the equity you’ve already used. Best of all, you can’t owe more than the equity in your home, and your home cannot be taken away from you when you’ve “run out” of equity.

While any reverse mortgage is best for healthy seniors who intend to spend a long time living in their own homes, there are several kinds of reverse mortgages, and it’s important that you do your research as to which one is best for you and your home. These different types include:

  1. Single purpose reverse mortgages: these are the least expensive, often causing little or nothing to you, though the payout is also the lowest. These mortgages are best for the lowest-income seniors, and they will help cover some of your property taxes or home maintenance.
  2. Home equity loan or line of credit: this type of reverse mortgage is suited for seniors who can make a small monthly payment and have good credit. These can also be very cheap to obtain.
  3. Home Equity Conversion (HECM) Saver reverse mortgages: these mortgages cost a tiny .01% of your home’s equity to obtain, though you will receive about 20% less of your home’s equity than the otherwise very similar HECM Standard loan. Both of these loans are issued by the Federal Housing Administration.
  4. HECM Standard reverse mortgages: this mortgage costs about 2% of your home’s equity right off the top to obtain, though you will receive more money yourself than you would with the three aforementioned mortgages.
  5. Jumbo reverse mortgages: these are not as regulated as the two HECMs mentioned above, but they could be better for a senior with a more high-end home. Just remember to shop very carefully.
If you still have questions, bestreversemtg.com can help you! Their specialists will help you negotiate with your lenders to figure out what reverse mortgage best works for you and your home.

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