Financing can be a confusing proposition for many consumers. In fact, many people have a variety of questions about loans, especially creative ones that may occur after buying a house. A typical reverse mortgage FAQ covers concerns qualifying for this special type of credit.
Homeowners often wonder about the qualifications. Many reverse mortgage FAQ lists include this information near the top simply because so many people want to know whether they could qualify for this type of financing. Homeowners age 62 or over are eligible to apply for a government-insured loan that would provide funds equal to the value of their home. Only one person of a couple must meet the age requirement; both owners do not have to be over age 62.
The amount of money borrowers can be eligible to receive depends on several factors. The age of the youngest spouse, the home’s appraised value, current interest rates, and any applicable government lending limits will determine how much money is available. Older owners with more valuable homes and more equity can expect to get more money.
Limitations on Use
After paying off the previous mortgage with the funds, people are free to use the money for any type of expense. Some people opt to use it for medical expenses or monthly bills. Others prepare for a new remodeling project on a residence. Some choose to plan a vacation with the money.
Owners can have existing financing in place when taking out a reverse mortgage. When closing the loan, the first order of business will be to pay off the existing financing. This must occur because the reverse mortgage must be the first lien on the property. After satisfying this lien, the borrower receives anything left over. This process will eliminate monthly loan payments. However, owners must continue to maintain the property and pay taxes and insurance on it.
Some homes do not qualify for this type of financing. Secondary residences and vacation homes do not fit the criteria for this financing. In addition, any rental properties that contain more than four units cannot be used for this type of loan.
Fees and Repayment
This type of loan will be due for payment at the time of the final borrower selling the property, leaving the residence permanently, or dying. At that time, all interest, advances, and costs will be payable to the lender.
Borrowers can choose a variety of payment plan options. Choose from a lump sum payment or fixed monthly payments. Some people prefer keeping the funds available as a line of credit. Borrowers can also devise a combination of these options to create a payment plan that fits their needs precisely.
Impact on Benefits
This loan will not have an impact on benefits such as Medicare and Social Security. Anyone receiving Supplemental Security Income or Medicaid must use the funds from the loan immediately. Any money retained will be considered an asset, which could affect future eligibility for benefits.
Learn as much as possible about the process before proceeding with a reverse mortgage. FAQ answers will help educate consumers.