With foreclosures occurring in record numbers, another option for many people is to do a reverse mortgage. This however, is only available to people who are age 62 years of age or older and only if they have equity in their house. For many people struggling to make ends meet and pay those higher property taxes, a reverse mortgage might be a good option to consider.
What the reverse mortgage does is it allows the homeowner to take out a loan against your home to pay off the current mortgage. This way the homeowner can continue living in the house as long as you want. This reverse mortgage loan does not need to be repaid until the home is finally sold.
The amount you can borrow with a reverse mortgage is calculated by your age and house value. This loan will pay off the existing mortgage first and then the rest to goes to the homeowner.
Many people find that a reverse mortgage allows them to stay in the house until they die. Obtaining a reverse mortgage can be a complex process therefore, it is best that the owner first receive financial advice. These loans are backed up by federal government and are therefore more difficult to complete than private loans. Most reverse mortgages are made in conjunction with a Home Equity Conversion Mortgage program.
How does someone qualify for a Home Equity Conversion Mortgage?
You must be age 62 or older. The house must be your primary residence. The amount you will receive is based on your current age, the value of house, and current interest rates.
The federal insurance when calculating the loan is capped at the value of your home, which is based on where you live, and is compared to homes in your particular area.
After paying off your mortgage, the remaining portion is paid directly to the homeowner either as a lump sum, as credit that you can draw as needed, or as a monthly payment while you remain in the house.
You are still the homeowner and are therefore responsible for taxes, insurances and maintenance.