Is a Reverse Mortgage Right for You

There are commercials everywhere about reverse mortgages, but they don’t always give you all the information on what it really is. They don’t always say what the qualifications are, or even explain amounts. So how do you know if a reverse mortgage is right for you?
First of all a reverse mortgage allows you to take the equity that one has built over years of making their mortgage payments and turns it into cash for you. It is not a traditional home equity loan or second mortgage. It differs in many ways.
To qualify for a reverse mortgage one must be a minimum of 62 years old. If there is more than one person in the home it goes by the age of the youngest person. Ones home must be owned outright or they must have a low enough mortgage balance that when they close on the reverse mortgage it can be paid off. Another requirement is that it must be the primary residence of the person who will hold the reverse mortgage.
There are two types of residences that qualify for a reverse mortgage. The first of which is a single family home that is the primary residence of the reverse mortgage holder. The second type of residence is a two to four unit home with one of the units being occupied by the reverse mortgage holder.
With a reverse mortgage you have no monthly interest or principal payments. However, the mortgage holder is required to pay hazard and flood insurance payments, as well as real estate taxes.
There are five different ways in which you can receive your payments. They are:
· Tenure-you get equal monthly payments as long as at least one of the borrowers still uses the residence to live in.
· Term-you get equal monthly payments for a fixed period of months with is decided by the borrower and lender.
· Line of credit- instead of monthly payments you get unscheduled payments or installments at different times in the amount the borrower chooses until the credit has been exhausted.
· Modified tenure- this is a combination of line of credit and scheduled monthly payments for as long as the borrower uses the home as their primary residence.
· Modified term- the borrower in this situation combines the line of credit and scheduled monthly payments for a period of time the borrower chooses.
There are a lot of things to consider when thinking about getting a reverse mortgage. There are a number of questions that should be asked to determine if it is right for you. For many individuals over the age of 62, this is something that can be very beneficial, especially if they do not plan to move. A reverse mortgage may not be for everyone, which is why it is important to do research. The more one knows about options the better decision they can make as to how it will work for them.

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