How do reverse mortgages work?

Answer 1

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

all at once, in a single lump sum of cash;
as a regular monthly cash advance;
as a "creditline" account that lets you decide when and how much of your available cash is paid to you; or
as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

Answer 2

A reverse mortgage is Home Equity Conversion Mortgage can be used to borrow against your current home's equity to buy or make a down payment on another primary home. How much you can borrow varies, depending on your age, the value of your home and interest rates. You have to make up any difference between the proceeds of this mortgage and the sales price and closing costs of the home you want to buy. But if these costs are less than the proceeds. The mortgagor is not required to make any payments, the home is owned by the bank upon the death of the mortgagor and the transaction is structured so that the loan amount will not exceed the value of the home at that time. That feature should raise a red flag. That means the homeowner isn't given the fair market value of the property initially because the bank must figure in the interest over the possible life of the loan.

Answer 3

The most common version is the FHA-backed HECM, Home Equity Conversion Mortgage.

The loan amounts are capped at whatever the FHA limit is for your area (higher in big cities, lower in rural areas, it's based on median sales prices for your county).

You can set it up with a combination of features. You can set up a big line of credit, take a chunk of cash, or set it up to send you a monthly check. The more cash used upfront, the less access you'll have to get more.

You will never, ever have to make a payment on a reverse mortgage. Having the backing of the FHA (Federal Housing Administration) guarantees that if your bank goes under, your loan will never be affected.

When you die, or move out of the house for 1 year, the loan is due. If your home is worth more than you owe, you get to keep the extra. If you owe more than the home is worth, you (or your heirs if you die) will have ZERO liability for any loss. None.

The biggest seller of reverse mortgages is Financial Freedom Senior Funding, a subsidiary of Indy Mac Bank, a large mortgage lender. You can go direct to them, or to a broker like me. A broker has to have undergone training to offer the product, I did it about a year ago. Your rates and costs will likely be identical anywhere you go.

After you find someone to inquire with, you are required to sit down with a reverse mortgage consultant (not affiliated with your actual lender), who will walk you through the risks and rewards of the program. ONLY after that, will you be allowed to accept the loan. It's set up that way to protect you.

You must be over 65. There is no credit qualifying whatsoever, though they will run a credit report. If you have the equity, you get the loan, plain and simple.

You can email me by clicking my avatar here. I have the software from Financial Freedom, and can run a scenario for you as to what you could qualify for. It's based on your age (actually the youngest of the owners), your home's value, and whether you have any existing liens on the home.

Answer 4

the bank advances the loan based on the "value of payments" you would have made had they given you a conventional mortgage. At some point (usually death of the mortgagee), the property reverts to the bank as full payment....it's kind of like you mortgage the property to the bank