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The reverse mortgages are typically the least expensive option, but they are limited in availability. Reverse mortgage interest rates are fairly low, currently around 2% for a variable rate and around 5% for a fixed rate. Even though you don’t have heirs to leave the house to, you might need it later to help pay for assisted living or extended home health care. The amount you can borrow depends on a variety of factors, including current interest rates, an appraisal of your home, your age (you must be at least 62 to qualify for a reverse mortgage), and your credit rating. If the amount you owe from the reverse mortgage grows to exceed the value of your home, the FHA will assume most or all of the loss. If you still possess money on your mortgage, the new loan can be used to pay off the remaining balance. “The main cost difference between lenders will be the origination fee,” says Maningas. And you cannot take out another home equity loan once you have a reverse mortgage. “Cost is one thing but you have to consider the expertise and professionalism of the person you’re dealing with.
With a single-purpose reverse mortgage, the lender restricts how you can use the money from a reverse mortgage. These loans are insured by the U.S. It’s important to understand how reverse mortgages work before signing up, as some types of reverse mortgages have downsides. For example, a single-purpose reverse mortgage may only be used to pay off property taxes or to make home repairs. If you own your home and are 62 or older, a reverse mortgage could allow you to access your home’s equity without selling or moving from your property. When you compare, he cautions against automatically picking the lowest-cost lender.
The big one is that you’re spending down what’s likely your largest asset. They are offered by some state and local governments and nonprofits, and are typically only available for low- and moderate-income borrowers who may not be able to qualify for other types of reverse mortgages. This guide explains the fundamentals of reverse mortgages so you can decide whether a reverse mortgage is right for you. Will the lender meet you face-to-face? Will they personally advise you and customize the loan to your situation? For such an important decision, it can be worth the investment to get the higher level of service”. You can retain the loan as a lump sum, a monthly amount, or a line of credit (essentially, a checkbook you use to spend the funds as needed), or some combination of these. You will pay a mortgage insurance premium to cover the potential for this type of loss, but it can be financed into the cost of your loan.
As useful as that all sounds, there are serious pitfalls to reverse mortgages, says Sandy Jolley, a reverse mortgage suitability and abuse consultant in Los Angeles. The maximum amount allowed by the federal government is $625,000 for 2014 government through the Federal Housing Administration (FHA).
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