Mortgage2USA.com
The Largest Non-Profit Mortgage Portal on the Internet.
Reverse Mortgages
How Reverse Mortgages Work
Information contained on the site has been obtained from recognized sources believed to be reliable but has not been verified by us and cannot be guaranteed for its accuracy or completeness. Every effort has been made to keep all information current and factual and we invite visitors to our site to bring any errors or unfair practices to our attention. Mortgage2USA.com is not a mortgage banker or broker and does not have any financial interest in any of the financial companies or sites listed on any of our pages.This site does not buy or sell any securities and nothing on any of our pages should be considered an offer to buy or sell any securities.
2003 - 2011 Mortgage2USA.com
The following Professionals are involved in today's Mortgage Markets :
The Reverse Mortgage was designed to allow older homeowners who have completely paid off their mortgage or have a low balance still remaining on their primary residence to begin to use the equity in their home to live on or to purchase items they wish to own or vacations they have planned while they are in their later years of life.
The formula that determines how much you can obtain with a Reverse Mortgage takes into account your age, the current interest rate ( See Interest Rates ), the appraised value of your home, the Reverse Mortgage limit for your area and any balance you owe on your current mortgage, if any. Currently, the maximum the Reverse Mortgage Program will allow your property value to be established is $625,500. That means if your home is appraised at $1,000,000, the Reverse Mortgage Program will only allow you to use a value of $625,500. Some banks and mortgage lenders have created "Proprietary" or "Jumbo" Reverse Mortgages that go up to $2,500,000 home values,but they typically have higher interest rates and lower loan limits as a percentage of the home value and are on a very individualized basis.
Homeowners who qualify for a Reverse Mortgage ( See Qualifications ) which include being 62 or older and living in the home, usually take several months to consider all the elements of Reverse Mortgages including finding a Reverse Mortgage Lender whom they will meet with to review the applications, distribution options, costs and fees ( See Costs & Fees ) and the counseling ( See Counseling ) necessary for the homeowner to attend. After the decision making process is complete, the actual Application process ( See Application Process ) will take 30 to 45 days to finish.
After the property is appraised and the terms are established, the homeowner reviews the "Good Faith Estimate" and other loan documents and goes to the closing. Then, the homeowner has 3 days to rescind the Application and cancel the Reverse Mortgage with no penalty. Following the 3 days, the homeowner will receive the proceeds from the Reverse Mortgage as established in the Application process.
There are several ways for the homeowner to receive the proceeds from the Reverse Mortgage and they can be mixed and matched as needed. 1). Lump sum ( The amount of equity in the home up to the Loan Limit mentioned above ) which is paid to the homeowner at the end of the 3 day waiting period after closing, 2). Equal monthly payments as long as the homeowner lives in the home, 3). Equal monthly payments for a fixed number of years, 4). Line of credit that can be drawn on at any time until the line is exhausted.
Since the homeowner receives funds from the Reverse Mortgage and does not repay the funds until he or she moves out of the home or passes away, the balance due on the Reverse Mortgage goes up after every distribution of funds to the homeowner. Reverse Mortgages also have interest rates ( See Interest Rates ) just like regular mortgages which are either fixed or adjustable. The interest on the outstanding balance of funds paid to the homeowner over the life of the Reverse Mortgage is calculated and added to the balance each month. This principal and interest balance due on the Reverse Mortgage is paid off if the homeowner sells the home from the proceeds of the sale. When the homeowner passes away, and there is no surviving spouse, the homeowners Estate can elect to pay the principal and interest balance on the Reverse Mortgage and take over the house or they can sell the house and use the proceeds to pay off the Reverse Mortgage. If the house sells for more than the balance due on the Reverse Mortgage, the Estate receives the difference.
The homeowner who receives proceeds from a Reverse Mortgage has several responsibilities including: 1). Live in the home as your primary residence, 2). Pay the annual property taxes, 3). Pay the annual home owners hazard insurance premiums, 4). Maintain the property and make all necessary repairs.
Table of Contents
