What a Reverse Mortgage Can Do for You

by | Nov 5, 2014 | Quick Tips, Reverse Mortgages, Senior Benefits

Tired of making monthly mortgage payments? Instead, want to receive payments based on your mortgage?

The U.S. Government has made this possible through Reverse Mortgages where the bank or lender actually pays you!

A reverse mortgage can help solve any cash problems you may have, while still maintaining ownership of your home with no time limit. This extra cash can help you pay off debt, subsidize health care, make home improvements, help family members, or simply enhance your lifestyle.

So .. what’s the catch?

The qualifications for a reverse mortgage are very minimal. You must be at least 62 years of age and occupy the property as your principal residence. Complete ownership or a considerable amount must have already been paid down on the mortgage. The property requirements follow FHA eligibility standards, which includes most 1-4 family houses and FHA approved condominiums.

The background behind a reverse mortgage is to help seniors live in their homes for as long as possible by letting them use the equity on their home for other payments. With a reverse mortgage, you will never have to make another mortgage payment on your home for as long as you live. There is no risk of default as long as you remain current on your homeowner’s insurance, real estate taxes, and home maintenance. The equity can be paid back to you in the form of monthly installments, a lump sum, or a line of credit. This allows a variety of options to choose from when deciding what to do with the extra cash.

Now .. How Much are we talking?

The principal amount or loan size is based on the maximum claim amount, which is the lesser between the appraised value of your home and the max amount HUD will insure ($625,500 through 2014). The maximum claim amount is then multiplied by the principal limit factor to determine the principle limit. The principle limit factor is determined by HUD and is based on the age of the youngest borrower and the expected average interest rate. For example, a borrower at age 65 and expected interest rate of 5.5% would get a principle limit factor of 0.478. This would then be multiplied by the appraised value of your home (say $300,000) to give you a loan size of $143,400!!!

 

Recap of Reverse Mortgage benefits:

  • receive tax-free funds for as long as you live in your home
  • choose the payment option that suits you
  • no restrictions on how you use the money

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