Reverse mortgages allow seniors to gain money through a monthly payment or buyout, but the person remains in control and ownership of the home, and they do not have to pay the money back. The home will be relinquished to the loan originator at the end of the owners life if the loan is not repaid; usually the plan is to not repay the loan and eventually relinquish ownership of the home to satisfy the loan. The excess equity from the sale will be returned to the owner or the heirs. This specialized type of loan is granted to people who own their home or are have a small enough balance to pay off at closing with part of the loan. The offer may sound too great to be realistic, but this type of loan has revolutionized the banking industry and made it possible for senior citizens to use the value of their home to make their golden years more gratifying.
Reverse Mortgage Calculator
Most banking sites allow customers to calculate the payments of a reverse mortgage through the use of certain criteria, including the age of the youngest homeowner and the value of the home. Sites that allow you to calculate the prices that the lender will pay is called a reverse mortgage calculator. Every lender will offer different rates regarding the location of the country and the value of the home, so it it good to check out various different reverse mortgage calculators. Some are very detailed, while others just ask your age and the value of your home. A reverse mortgage calculator is easy to find by going to the website of a major lender, such as Countrywide or MetLife.
Reverse Mortgage Lenders
Reverse mortgages have become widely popular throughout the past ten years, and now almost every financial institution and bank offers some type of reverse mortgage. Very few lenders will offer the same rates, and every lender will have different policies and procedures that will offer different incentives and special rates. It is a good idea to shop around for the best rate on your home before you sign a reverse mortgage loan. Some of the leading reverse mortgage lenders are MetLife, Wells Fargo Bank, World Alliance Financial, Financial Freedom, Countrywide, Omni Home Financing, and Bank of America.
Reverse Mortgage Information
Sometimes people don't understand the difference between a reverse mortgage and a home equity loan from a bank. A home equity loan from a bank is like a line of credit. To qualify for this traditional type of second mortgage requires that the borrower have a certain degree of income versus their debt ratio. A home equity loan also requires the borrower to give a monthly payment to the lender. The reverse home mortgage is the complete opposite, and it actually pays you for the purchase of your home in advance.
Many factors determine the amount you will be able to borrow and the interest rate of the loan, and the FHA plays a large part in the equation because their mortgage limits are used to calculate the base rates for the reverse mortgage loan. The higher the cost of the home and the greater the age of the borrower, the larger the loan will be that the lender offers.
No payments ever have to be made as long as the borrower for the reverse mortgage loan is the principal residence of the home. The home is still completely under the ownership of the borrower and all taxes and insurance must be kept current to satisfy the requirements of the loan. If the owner decides to sell the home, they will be required to repay the cash that was received from the reverse mortgage along with the interest on the loan and other fees determined by the lender. The remaining equity remains for the owner.
Reverse Mortgage Rate
Reverse mortgage rates come as both fixed and variable rates. Usually the rates are identical for all lenders in a certain region, but the real reason that rates and costs will vary depending on the lender is because there are many different programs and products offered regarding reverse mortgages lenders. Buyer beware of many unscrupulous institutions who will disguise other products as "reverse mortgage loans." In reality, all true reverse mortgages have a variable interest rate that is tied into the interest rate at which US Treasury notes are loaned. At the origination of the reverse mortgage loan, the borrower will have the decision as to whether lock into a fixed interest rate or take the variable rate. Interest rates are usually adjusted by the Federal Reserve every quarter, but it will be up to the lender to change the interest rate on the loan.
Reverse Mortgage Loan
Before pursuing a reverse mortgage loan, a home owner should seek counseling through HUD-approved agency to learn as much reverse mortgage information as possible. These agencies are designed to help home owners understand the process and requirements of a reverse mortgage loan. Since these loans are serious legal agreements, HUD suggests that all counseling take place in a face to face manner between the home owner and the agent. The agent will provide the home owner info about reverse mortgage loans and reverse mortgage lenders, and help the home owner decide if the loan if right for the situation.