Reverse mortgages are a type of loan that allow homeowners to access the equity in their home without having to make monthly payments. This means that you can never owe more than the value of your home the moment you or your heirs sell it to pay your reverse mortgage.
Inverted home loansgenerally need to be repaid when you move out of the house or when you die, but there are certain conditions that could require repayment sooner. Anyone can pay a reverse mortgage, including the borrower, spouse, heirs, or other family members.
This is more common in situations where the last surviving borrower or spouse who is not eligible for the loan dies, and the heirs decide to cancel the loan. Because a reverse mortgage is a loan with “negative amortization”, your balance increases over the life of the loan. Invested mortgage lenders are now more willing than ever to help pay the costs of inverted mortgages whenever they can. If you buy those types of financial products, you could lose the money you get from your reverse mortgage. Reverse mortgages don't have income or credit rating requirements, but there are rules about who qualifies.
Unscrupulous home improvement sellers and contractors have turned to older people to help them obtain reverse mortgages to pay for home improvements, in other words, so they can earn money. As with any mortgage, there are conditions to keep your reverse mortgage current and, if you don't meet them, you could lose your home. However, lenders must perform a financial evaluation when deciding whether to approve and close your loan. Only the lump sum reverse mortgage (one-time payment), which gives you all your income at once the loan closes, has a fixed interest rate. The counselor should also be able to help you compare the costs of different types of reverse mortgages and explain how different payment options, fees, and other costs affect the total cost of the loan over time.
With a reverse mortgage, instead of the landlord making payments to the lender, the lender makes payments to the homeowner. Repayment of the loan is mandatory when the last surviving borrower leaves the home permanently or does not maintain property taxes or property insurance. If you're considering taking out a reverse mortgage, it's important to understand how they work and what they entail. The ability to leverage the value of their home by converting their equity into cash can be a powerful tool for someone trying to find a way to expand their financial options for a wide variety of reasons. Keep reading to learn more about how reverse mortgages work, how to qualify for a reverse mortgage, how to get the best deal for you, and how to report any fraud you may see.