Reverse Mortgage- What should you know before you get it?

A reverse mortgage can also be termed as a lifetime mortgage. It is another form of loan available to seniors above 62 years. In the reverse mortgage the lender lends you money based on your home value, the equity value in your home and your age. The lender makes the payment instead of you making the payments. The lender pays you the money either in monthly installments, or in a lump sum or as a line of credit. No repayment is required until you stop using your home as a principal residence, sell it, or leave it permanently or you die. The amount of money will increase with time since you are not making any payments for it.


When can you apply for it?

You must be at least 62 years old to qualify for a reverse mortgage. You must own a home in which you are currently residing. Your home should have a low mortgage balance or your home mortgage must be fully or nearly paid off. You will also need to get consumer information from HECM (The Home Equity Conversion Mortgage) counselor before obtaining the loan. The home must be a single family home or a 1-4 unit one.

What you need to consider before you get it?

Obtaining a reverse mortgage is higher than a traditional one. You may need to pay some of the incurring costs in cash only. You will continue to pay your property taxes, insurance and so on. If you intend to leave your home or free it for you children, it will not be suitable for you because your relatives or children will not be able to inherit it unless they pay it off after your death. The reverse mortgage reduces the amount of equity in the home as well.

Remember the costs of reverse mortgages are higher than those of traditional loans. They are also much more complex. You had better compare offers for reverse mortgages before you apply for them. You must consult a housing counselor. He will help you decide on right mortgage for you. And more importantly do not sign a loan application before you completely comprehend it. Ask help from those mortgage counselors. All the best for you.