Reverse Mortgage Financing

Learn about what HUD reverse mortgage is and how it works.

Did you know that if you are at the age of 62 and older you are entitled to borrow against your home equity and convert it into cash without having to move out of your house? This is called reverse mortgage and it can be a tremendously beneficial retirement tool for elders who are on a tight budget. This article will provide reverse mortgage information to help you understand it.

What is Reverse Mortgage?

Reverse mortgage is a form of lifetime mortgage or loan available in the United States to seniors aged 62 or older. This is under a Federal Program administered by the Housing and Urban Development or HUD. Eligible homeowners are allowed to access a portion of their equity and they can draw the mortgage principal in a lump sum by means of receiving monthly payments over a specified term or over their combined lifetimes as a revolving credit fund. It can even be a combination of both terms.

How Reverse Mortgage Works

To qualify for the reverse mortgage, the candidate for the mortgage must be 62 years of age or older and own his or her own house. The amount that a homeowner can borrow will depend on the mortgage ceiling of the Federal Housing Administration or through the appraised value of your home, whichever is lower. The borrower’s age will also be taken into consideration plus the current rate of interest. The lower the interest rate and the older the borrower is, the higher the credit line for which the borrower is qualified. Should you wish to determine the amount of credit that will be available to you if you would pursue a reverse mortgage, you can go online and make use of the online reverse mortgage calculator. All you need to do is provide the estimated value of your home, your zip code and your age and your co-owner’s age.

With the reverse mortgage, borrowers gain access to their home equity to get cash which could be paid out as a line of credit, steady monthly cash advance, lump sum or a combination of these.

If you choose the line of credit option, you will be paying interest only for the funds that are actually utilized. By taking advantage of the privilege of reverse mortgaging, retirees in the low to middle income bracket can have the security of a regular source of income that can help them pay for unforeseen expenses. The mortgage amount will never go over the amount of the house value and the mortgage lender is paid either from the equity of the sale or the home refinancing. If in case the borrower terminates the use of their property as the primary residence by selling it, they or their inheritors are expected to repay the funds gained from the reverse mortgage on top of interests and other fees. Should the homeowners pass, their inheritors can keep the house and continue paying the mortgage or sell the house and pay the loan.