Reverse mortgages no longer something to fear
C2 Financial Corp
C2 Financial Corp Lomita, CA
Published on July 25, 2021

Reverse mortgages no longer something to fear

When reverse mortgages are mentioned, often the reaction is similar to offering someone toxic waste.

Verify your mortgage eligibility (Oct 18th, 2021)

In the past, that reaction had some validity. But now the reasons for hating reverse mortgages have been mitigated or eliminated entirely, and FHA and HUD even regulate many of these offerings.

A reverse mortgage allows a homeowner over age 62 to borrow against the equity in their home. The reverse mortgage then becomes due when the borrower moves out or dies.

 Rather than requiring that payments be made like a conventional mortgage, a reverse mortgage doesn’t require payments. The interest on the loan is just added to the amount of the loan. How much can be borrowed on a reverse mortgage is based on the age of one of the borrowers and the appraised value of the home. The borrower — or at least one of the borrowers if it’s a couple — must be at least 62 years old. The older the borrower, the larger the percentage of the appraised value the reverse mortgage might provide. For instance, a 62-year-old might qualify for 45% of the appraised value of a home, while an 82-year-old might qualify for as much as 65%. The amount advanced will also be after fees and closing costs.
 The interest rate might be floating or fixed, with fixed rates currently running in the 3% to 5% range. A reverse mortgage isn’t like a home equity line of credit, which often is in addition to a primary mortgage. And most lenders won’t provide a home equity loan against a home that has a reverse mortgage.

Reverse mortgages are generally intended for a primary residence, not a vacation home or a rental property. The lender will probably require the borrower to confirm that the home is a primary residence at the time the mortgage is made and might require periodic confirmation that it’s still the primary residence. When the borrower moves, if there is still equity in the home it goes to the borrower. If not, the mortgage company doesn’t pursue the borrower – or the borrower’s estate — for the difference.

Verify your mortgage eligibility (Oct 18th, 2021)

There are a couple of primary types of reverse mortgages. One gives proceeds once. The other provides a line of credit. And some reserve mortgages provide some of both. The reserve mortgage might pay off an existing mortgage or might provide cash flow or funds to invest.

Next week, we’ll explore who might benefit from a reverse mortgage and which types of these loans might best fit their needs.

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C2 Financial Corp
C2 Financial Corp Lomita, CA
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