Digital News Report – You may be thinking about getting extra cash from the home you own as a way to supplement your monthly living expenses. This article will explain how a reverse mortgage loans work and how to find the best quotes by these kinds of providers. Another name for these type of loans are called reverse annuity mortgages.
How Does a Reverse Mortgage Work?
Here is simple way a reverse mortgage is explained. If you are over the age of 62 years and are looking for some extra monthly cash, and you own your home you live in, you can convert part of the equity of your home into cash without selling your home or paying another new monthly bill. You don’t have to pay back the money your receive, unless you move out of your home, sell your home, or if you die. At that time, you are required to repay the reverse mortgage loan during those instances. In most cases the reverse mortgage income is tax-free and there usually isn’t any income restrictions.
What are the Best Reverse Mortgage Loans?
It is important to understand the differences kinds of reverse mortgage loans there are available when shopping around for a reverse mortgage quote. There are three different types of reverse mortgage loans. They are single-purpose reverse mortgages, federally-insured reverse mortgages, and proprietary reverse mortgages.
Single Purpose Reverse Mortgage Loan
The single-purpose reverse mortgage are sometimes made available through non-profit organizations and through local and state government agencies. Most of the time these are the least expensive kind of reverse mortgages. The bad news is that they are not available everywhere and to everyone. These loans also have restrictions set forth on what you can spend the money on, such as only for home repairs or property taxes, and it may be available only for low to medium income people. Each will have different requirements, so there may be just the right match for the financial needs of the person seeking out a reverse mortgage.
Home Equity Conversion Mortgage Loan
A federally-insured reverse mortgage is also called a Home Equity Conversion Mortgage (HECM) and is backed by the government’s Department of Housing and Urban Development agency (HUD). The HECM loans are more expensive than the single-purpose reverse mortgage, but they are widely available and there are not income or medical requirements, and the cash can be spent for anything. If you go for a HECM reverse mortgage you have to meet with a counselor from an independent government approved housing counseling agency. The counselor will explain in detail how the reverse mortgage loan works and other alternatives that may be available. The amount you can cash out of the reverse mortgage loan depends on your age, the appraised value of your home, current interest rates, and the kind of program you selected.
Proprietary Reverse Mortgage Loan Lenders
The proprietary reverse mortgage is an arrangement with private lenders and are backed by reverse mortgage companies that offer it. These are also widely available and do cost more that the single-purpose reverse mortgage, but you will have more freedom in spending your money for any purpose. You also might have to attend counseling in order to participate in their program.
In conclusion, you should consider how much money you would need to supplement your retirement income each month. Decide if there is other alternatives to increase your monthly cash flow. You might be able to find another way to supplement your income. If you do decide that a reverse mortgage loan is right for you, weigh out the different reverse mortgage programs available and learn about all expenses and risks involved with each one. After doing adequate research and shopping around you will very likely find the best reverse mortgage loan option for yourself.
By: Victoria Brown