Reverse mortgage is now becoming a trend to many of the homeowners in the United States of America. However, before you will get yourself interested into it, a few of the things that you should know about reverse mortgage are listed below.
First things first you must ask yourself “What is a Reverse Mortgage?” – A reverse mortgage is a type of home loan that will allow you to convert a portion of your home’s equity into cash. You can be paid with the equity that built up over the years of home mortgage payments.
However, this is by far different from the traditional home equity loan or second mortgage, because reverse mortgage does not require repayment until the borrower does not use the home as his or her principal residence anymore. This kind of benefit is provided by FHA’s HECM.
Who will then qualify for Reverse Mortgage you might ask. In order to qualify, applicants must be a 62 years old or older homeowner, own the home outright, or has low mortgage balance that can be paid off with the proceeds of the reverse loan, and must live in the home.
Those qualified applicants who do not buy their house with FHA mortgage insurance is still qualified to apply.
The home types that qualify for reverse mortgage are those single-family homes, a 1-4 unite home provided, one of the unit is occupied by the borrower, and those HUD approved condominiums and manufactured homes.
The difference between reverse mortgage and a bank home equity loan is that with a bank equity loan, a sufficient income versus debt ratio is required to qualify the loan and monthly mortgage payments are required. On the contrary, with reverse mortgage, it pays the borrower regardless of his or her current income. In addition, with reverse mortgage, there will be no monthly payment because the loan is not due as long as the borrower had the house as his or her principal residence.