Reverse mortgages can be a great option for seniors who want to stay in their home but are having trouble making their monthly payments and meeting other financial obligations. If you are over 62 and own your own home, the bank will pay you money so you can stay in it. Before deciding whether or not to get a reverse mortgage, it's important to find out as much as possible about the loan.
A reverse mortgage loan can be given to anyone, even if they don't have any income. Your home must be a single-family home in a building with one to four units, a condo, or a manufactured home. Most mobile homes and co-ops are not eligible. The house has to be at least a year old, and you have to meet with a licenced counsellor first.
You can get the loan as a lump sum, a fixed monthly amount, or a line of credit that you can use whenever you need it. The money can be spent on almost anything. This can include things like paying your property taxes or medical bills, making repairs or improvements to your home, paying off your credit cards, or just the costs of living. The amount of money you get depends on your age, how much equity you have in your home, how much it is worth, and the interest rates at the time. You don't have to pay back the reverse mortgage loan until you sell the house, move out for good, or die. Your loan could also come due if you let the property fall into disrepair, if you don't pay property taxes or hazard insurance, or if the last remaining borrower is sick and can't live in the house for a year in a row.
With a reverse mortgage loan, you have to pay some fees, just like you would with a regular mortgage. These fees include origination fees, which cover the lender's operating costs and can't be more than $2,000 or 2% of the maximum FHA loan limit right now. You will also have to get mortgage insurance and pay a fee for an appraisal that ranges from $300 to $400. Other closing costs include fees for a credit report (usually less than $20), flood certification, closing and title search, document preparation, recording, courier, pest inspection, and land survey. A service set-aside fee of $30 to $35 per month will also be added.
You should be able to get all the reverse mortgage information you need from your counsellor before making your final decision. It will be nice to have the option of staying in your own home if that is what you want.
