Reverse mortgages are offered by lenders who are insured by the federal government. Those who qualify for them can get a lot out of them. Home Equity Conversion Mortgages (HECM), Fannie Mae (FNMA) Home Keeper, and Financial Freedom Cash Accounts are the three types of reverse mortgages available in the United States right now. The basic idea behind a reverse mortgage is that it lets homeowners over the age of 62 turn some of the equity in their homes into tax-free income without having to sell the home, give up the title to the home, or take on a new monthly mortgage payment. The name "reverse mortgage" comes from the fact that, unlike a traditional mortgage, the lender gives the borrower fixed payments or a lump sum over time. Single-family homes, mobile homes built after June 1976, condos, and town houses are all types of property that are eligible.
When you want to get a reverse mortgage, the process is more complicated than when you want a regular mortgage. Before they sign, applicants must talk about the loan with a counsellor from the U.S. Department of Housing and Urban Development. This is in addition to meeting the age and property type requirements. There are five different ways to pay back each United States government-backed loan, giving applicants the freedom to choose what works best for them. These include payments made to the borrower monthly, quarterly, semi-annually, or annually for a set number of periods or a lump sum that can be invested.
As with traditional mortgages, the interest rate also affects how long you have to pay back the loan. Those who choose variable-rate mortgages will pay more than 1% less than those who choose fixed-rate mortgages. This is because the risk the borrower takes on by agreeing to monthly adjustable rate calculations can increase greatly over the life of the mortgage. When the borrower stops living in the house, the full mortgage payment is due. This can be paid by the borrower or his or her heirs if the borrower dies.
Many people think it's a bad idea to borrow money later in life, but reverse mortgages just let seniors enjoy the equity they've already built up without having to worry about making monthly payments on a fixed or reduced income. This can make a big difference in the quality of life for a lot of older Americans and let them enjoy what they've worked for all their lives.
