Mortgage is just as complex as any other business and borrowers can encounter many other mortgage option along the way. One of which is the reverse mortgage. This option is a government insured program and is offered to homeowners that are at least 62 years old. What happens when a persons go for a reverse mortgage is that, he/she can covert a fraction of his/her home equity into cash.
The process of converting your home equity is called the Home Equity Conversion Mortgage or HECM. This privilege, in addition to your social security, 401k, and pension, will be given to you when you enter your retirement period.
Reverse mortgage can be achieved in various ways. According to a source, you can get your reverse mortgage in the form of a monthly payment, line of credit, or even as a lump sum depending on which type you choose.
Advantages Of A Reverse Mortgage Over Other Options
Another option you can take when talking about home equity is getting a line of credit from it. However, HELOCs or Home Equity Lines Of Credit come with a recurring monthly bill, unlike the reverse mortgage that actually eliminates your monthly payment. Although of course, reverse mortgage does not take away your expenses for taxes, insurance, and home repairs. But then, this may still be a better option compared to HELOCs for a variety of reasons.
However, it's worth noting that a reverse mortgage is still a mortgage, so it still needs to to repaid. But the great thing about this mortgage move is that you won't be responsible for paying more than the property's sale cost. FHA covers the difference for conventional loans and lenders cover the loans that aren't backed by FHA. Whichever place you fall in, you are saved from some major costs.
How To Get A Reverse Mortgage
To cut to the chase, when you want a reverse mortgage, all you need to do is talk to your lender about it. They can then assess your situation and look at your financial status to make sure that you can afford the process. It is also possible for the lender to take a portion of your loan and place it in escrow to pay for future expenses such as tax and insurance. After the application, a counselling may be necessary to make sure that you understand everything there is to be understood about the process. Your home will also need to be appraised to determine how much money your lender can give you. After all these, your loan can be a closed deal and you can now access your equity.
