Reverse mortgages are home loans available to seniors ages 62 and older who have built up significant equity in their homes. These loans allow homeowners to convert part of their home’s equity into cash, which they can then spend on healthcare or other needs and desires with the home acting as collateral.
Reverse mortgages can be a helpful tool, but few people know very much about them. Here are three things you should know about reverse mortgages:
- They don’t exceed the value of your home. Federal regulations prevent lenders from structuring transactions that exceed the value of your home. However, if your reverse mortgage does exceed the value because of unexpected circumstances, mortgage insurance ensures that you won’t be responsible for paying the difference.
- There are several types of reverse mortgages. A single-purpose reverse mortgage is usually offered by a local, state, or non-profit agency that requires you to use the payments for a specific purpose. A home equity conversion mortgage is federally insured, and it requires a counseling session. A proprietary reverse mortgage is not federally insured, and it is usually available for higher-value homes.
- Several factors affect how much you can borrow. The amount lenders allow you to borrow may depend on the current value of your home, the type of reverse mortgage, your age, current interest rates, and more.
If you are interested in learning more about whether a reverse mortgage is right for you contact us today.