This is a great option for the certain people. It most commonly uses property equity to make your house payments. Therefore, you no longer have a payment due each month. You still pay insurance and taxes for the property, as well as any HOA dues; and you can still pay interest or principle reduction at your discretion. With the variable-rate ARM option, you can have a line of credit that builds and can be used at your discretion in the future. The HECM reverse product allows you to still own your home, then gives your estate a year to settle by selling the house or refinancing it, in the event there is leftover equity.
Reverse mortgages allow those aged 62 or older to maintain the title and ownership of their home without paying a monthly mortgage payment for principle and interest. The most common and best overall option is usually a Home Equity Conversion Mortgage (HECM). These loans require no monthly loan payment, can use the equity to make you a monthly payment in certain cases, and can provide a line of credit. In a forward traditional mortgage, a borrower makes a payment each month. With a reverse mortgage, instead of making a payment, the interest is added each month to the balance. In certain cases, borrower(s) can have a payment made to them each month from their equity; and this is a set monthly amount that is added to the balance. When using the line of credit feature, anything available that isn’t used grows at a rate of 5%, available each year. For example, if you had a $10,000 line of credit available that wasn’t used for a year, the following year, your line of credit available would increase to $10,500. Additionally, if you set your loan up with a line of credit and make payments to reduce principle or cover your interest, this adds to your line of credit availability.
There is a proprietary reverse mortgage that allows for much higher loan amounts than the HECM options do. These loans are not federally insured and thus typically have stricter credit and lower loan to value guidelines. This option typically doesn’t have required mortgage insurance which is one of the benefits. Skyridge Lending LLC does these loan types on a case by case basis, depending on what is best for the borrower(s).
A reverse mortgage has many options at setup for closing costs. At Skyridge Lending we work with each customer to determine the best loan option and lowest closing cost option for your situation so contact us today if you would like to know more or have a no cost assessment done. Click here to compare options.
As with any mortgage, the borrower remains responsible for payment of property taxes, homeowner’s insurance, and home maintenance.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
HECM mortgage certification for reverse mortgage counseling.
Basic explanation of reverse mortgages via video.
CFPB (consumerfinanceprotectionbureau) reverse mortgage discussion guide.