If you are 62 years or above and you have accumulated home equity and you are considering ways of supplementing your retirement income or pension, then you might want to consider reverse mortgage which is also termed as home equity mortgage (HECM) which is one of the important financial product in the United States. Reverse mortgage has no monthly mortgage payments to be made, unlike the ordinary forward mortgage.
The beneficiaries of the reverse mortgage still pay taxes and the property insurance as well as using the house as their main residence for the duration of the loan. As you receive the monthly payments, the loan balance keep rising while on the other hand the home equity keep declining.
The reverse mortgage is a loan by all definitions and will also be repaid in full when the borrower sells the property or when he/she passes on. If the borrower wishes to pay off the loan at any time, he or she still has the right to do so. The reverse mortgage is conveniently designed such that the loan balance cannot exceed the value of the home. The borrower does not need to worry about the lender failing to remit the payments because these loans are fully guaranteed by the federal government the United States.
One of the attractive features of the reverse mortgage loan or the HECM program is their simple and easy to meet requirements as compared to the other financial products like the mortgage refinance or the home equity loan. For a borrower to be eligible to the reverse mortgage, he or she should be:62 years or older,should solely own the home and using it as the main residence,should be accommodating a family of up to four members and the property should be in good housing condition prior to the application for the mortgage. The borrower is also required to set up a meeting with a counsellor that is approved by the HUD to determine if the reverse mortgage is the best option as at the time. The counselling sessions are expected to help you understand better how the reverse mortgage works and the other various financial options available for you.
Prospective borrowers also undergo financial assessment before they can qualify to ensure that the borrower is able and willing to pay for property taxes, basic home maintenance,home owner’s insurance and the Home Owner’s Association fees if and when they are applicable.
The age of the borrower,the value of the property and the value of home equity are the main factors that determine the amount the amount the borrower is eligible for. You can choose to receive the loan in lump sum or monthly for specified time or a specific amount as long as you live in the house or even combine two or more payment plans that suits your needs.