Reverse mortgage is a loan especially for senior citizens of 62 years old and older. The purpose or reverse mortgage is to release them from refinancing mortgage home equity in a big lump sum or in small multiple payments. This allows the home owner to keep the home title. To qualify for the loan mortgage refinancing need to be 62 years old or more than 62 years old. There are no minimum income or credit requirements but there are a few other requirements you have to adhere to. Before you proceed with the process, it is best to make sure that you qualify so that you will not waste your time and money on something you are not getting.
This loan is named as reverse mortgage because the payment is "reversed." Instead of having to pay monthly payments to a lender, a lender makes payments to you. Which is why it is known as a reverse mortgage.
You can use the mortgage for anything but it is important for you to pay off any existing mortgages. To pay off the existing mortgage debt you cannot get a new loan so it is best to get help from family and friends. If you are in a pending bankruptcy, it might slow down the process of getting a reverse mortgage to approval.
You will need to get a third party counseling as a safeguard to make sure that you fully understand the meaning of reverse mortgage and how you can apply for one. You can get counseling from a local HUD approved counseling agency. The counseling may be conducted face to face or through the phone, whichever is more convenient.
The counselor then must review these important things:
* Options, other than a reverse mortgage, perhaps available for the prospective applicant.
* Other home equity conversion options such as property tax deferral programs.
* The financial implications.
* The tax consequences on the applicant.
There are five factors that determine the amount of money the applicants can get:
* The appraised value of the property. It can be any health or safety repairs or any existing liens.
* The interest rate, according to the U.S. Treasury 1 year T-Bill or the LIBOR index.
* The age of the senior. If the senior is older than there will be more money.
* The form of payment whether taken as line of credit, lump sum, or monthly payments.
* The location of the property.
What are the types of homes eligible for a reverse mortgage?
* single-family homes
* 2-4 unit properties
* manufactured homes (built after June 1976)
* condominiums
* townhouses
What happens if I have existing mortgage? This is the most popular question that interested applicant would ask as most of them still have mortgage debt. You might be qualify to have a reverse mortgage if you have an existing mortgage but the reverse mortgage must be in the first lien position so you will have to pay off your mortgage by using the reverse mortgage, your savings or assistance from your family and friends.
Let's set up an example for better understanding.
You owe about $100,000 on a mortgage and according to your age, home value and current interest rates; you are eligible to get $125,000 if you apply for a reverse mortgage. So, you get $125,000 to repay all your mortgage debt and you still have $25,000 for anything you wish to do. This is a better situation for you, as you have an additional $25,000 to do anything you want. You can either use that for your daily expenses or you can even go on a holiday.
But the problem is when you are only eligible to get $85,000, and then you will have to come up with another $15,000 to repay your existing mortgage debt. Then, you will not be having any monthly mortgage payment. In case where you have no additional fund to cover the debt, you should consult your family and friends and ask them for help because you cannot have new debt such as having a new loan. As such, this is a bad situation as not only you have no additional money to spend but you have to borrow from family and friends to cover up the additional cost.
There are many types of reverse mortgages available so you have to make sure that you choose the right one for yourself. Below is a list of reverse mortgages available:
1. Home Equity Conversion Mortgage (HECM)
This is perhaps the most popular reverse mortgage. It is also the oldest reverse mortgage available in the market. This is an FHA product.
2. Fannie Mae Home Keeper & Home Keeper for Home Purchase
3. Financial Freedom Cash Account
4. CHIP Reverse Mortgage for Seniors
This plan is created based on the senior's point of view.
5. There is always something new, check in with us to find out what changes have been made to the above programs and what new programs exist.
To apply for a reverse mortgage, you must learn everything you can about the reverse mortgage. Normally, you will come across some advertisements in the newspaper that get you intrigued into knowing more about reverse mortgage. Then, you might contact a reverse mortgage lender or mortgage broker and make arrangement for a meeting to consult more about reverse mortgage. The next step is to get counseling as it is a requirement to make sure that you fully understand the program. Then you can start applying by filling out the forms. The next thing is the lender will process your application by having an evaluation of your home. Once the lender has finalized the amount to be disbursed, they will go through the underwriting. When the loan is approved, you will be contacted to close the loan and receive the disbursement.
There are some circumstances where you might not want to get a reverse mortgage. You should not get a reverse mortgage if you intend to leave your home within the next two to three years. This is because if you want to leave your home, there might be other less expensive ways to consider obtaining funds. For example, you could consider a home equity loan, no-interest loans or grants that might be available in your location.
Learn more about reverse mortgages in MN at http://www.MinnesotaReverseMortgage.net John Mazzara is involved with financial services in the Twin Cities, MN. Officing out of Edina, Minnesota-John is centrally located within the 7 county MN metropolitan area. John owns three separate businesses-a licensed real estate broker associate selling Minnesota real estate since 1986-affiliated with RE/MAX Associates Plus http://www.MinneapolisStPaulHomes.com, an independent CFP-certified financial planner since 1989 with an independent Minnesota financial planning firm-Financial Planning Associates and the owner of a Minnesota mortgage broker firm-Venture Development Inc-specializing in residential, commercial and investment mortgages for purchases of single family homes, investment properties and commercial property. Venture brokers FHA, VA, Conventional loans and lines of credit. If you are looking for someone to help you in the areas of real estate sales/purchase, mortgages, or and/or financial planning and insurance you should call John for a free 1 hour consultation to see if he can meet your needs. 952-929-2577. RE/MAX Associates Plus and Venture Development are located at 7300 France Ave S, Suite 410, Edina, MN 55435
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