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HOW DO REVERSE MORTGAGES WORK?
Reverse mortgages are loans that are available to homeowners who are 62 years of age or older.
These loans allow homeowners to borrow against the equity in their home without having to make monthly mortgage payments. The loan is repaid when the borrower dies, sells the home, or moves out of the home.
THERE ARE TWO TYPES OF REVERSE MORTGAGES:
Private reverse mortgages are offered by private lenders and are not insured by the government.
Government-insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs), are insured by the Federal Housing Administration (FHA).
No matter which type of reverse mortgage you choose, the loan will not have to be repaid until the borrower dies, sells the home, or moves out of the home.
HOW MUCH CAN I GET ON A REVERSE MORTGAGE?
The amount that a borrower can receive from a reverse mortgage depends on the value of their home, their age, and the interest rate.
For example, a 65-year-old borrower with a home worth $300,000 could get a loan for $150,000.
HOW MUCH CAN I GET FIRST YEAR REVERSE MORTGAGE?
The amount that a borrower can receive from a reverse mortgage in the first year is limited to 60% of the loan’s principal.
For example, if a borrower takes out a loan for $100,000, they would be able to receive $60,000 in the first year.
HOW MUCH EQUITY NEEDED FOR REVERSE MORTGAGE?
The amount of equity needed for a reverse mortgage depends on the borrower’s age and the value of their home.
For example, a 70-year-old borrower with a home worth $300,000 would need 50% equity to qualify for a reverse mortgage.