Facts About Reverse Mortgage Loans

Most mortgages are loans taken out by borrowers ending up in payments being made back to the lender every month. As their name implies, reverse mortgage loans are the opposite. A reverse mortgage entails either a lump sum or monthly payments being sent from the bank or other institution to the homeowner. Simply put, it is a way to cash out equity in your house without having to move or incur debt that requires payments made toward it.

There are limitations as to who is eligible for a reverse mortgage. The borrower must be at least 62 years of age. Prior to receiving a reverse mortgage the borrower must go through a free education course approved by the Department of Housing and Urban Development. This is to ensure seniors are not taken advantage of and that they completely understand the terms.

The amount given to the borrower does not have to be repaid until the house sells or the borrower moves out. So long as the borrower is the occupant of the home there is never a payment due. This gives seniors peace of mind knowing that borrowing against their home can never result in a foreclosure with a reverse mortgage.

Any existing mortgages must be paid off first with the proceeds from a reverse mortgage. There are no credit requirements or down payments like with normal variety mortgages. As to the amount of money which can be obtained from a reverse mortgage, that depends on quite a few variables.

Most important is the appraised value of the property. The more the home is worth translates to the greater amount of money available to the owner through a reverse mortgage. Current interest rates also impact this calculation. The lower the current market interest is translates to more money available to the reverse mortgage borrowers.

The borrower's age also is used in the calculation to determine how much money is available via the reverse mortgage. As a general rule, the older the borrower the more money that can be taken out on the reverse mortgage. The Department of Housing and Urban Development has put out a formula which is available online for calculating the impact of the borrower's age upon the amount available.

Where you live also effects the amount available. Each county entails different guidelines as to the amount available. If you desire your money in monthly installment payments this also increases the amount of cash you can secure. If you desire it in one lump sum this reduces the amount.

Reverse mortgage loans can be confusing. Make sure you have a trusted party explain to you exactly what one entails. The HUD education session is very valuable, and you should pay close attention during it. A reverse mortgage can provide much needed cash. Done right it can be a senior's best friend.