A Beginner’s Guide to Reverse Mortgage

A Beginner’s Guide to Reverse Mortgage

A  traditional mortgage is a legal agreement between you and a bank or lender, who will lend you money to buy a home or property. A reverse mortgage is the exact opposite of it wherein individuals older than 62 get cash payments from their lenders based on their home’s equity. 

reverse mortgage does not transfer the ownership to the lender, and you still have to cover all the associated costs. If you want to avail of a reverse mortgage and want to know more before making a decision, read on:

What is the eligibility for getting a reverse mortgage?

You need to fulfill some conditions to avail of a reverse mortgage:

  • You must be 62 years or older and own a house.
  • You must be the primary resident of your home.
  • You should not have overdue monetary obligations, including property taxes, homeowner’s insurance, homeowner’s association dues, and other legal dues. 
  • Your property should be in good condition and regularly maintained. 
  • Your home must fall under any of these—a single-family home, a manufactured home built after June 1976, a multi-unit property with up to four units, a condominium, or a townhouse.

What are the types of reverse mortgages?

There are three types of reverse mortgages, and all cater to different financial needs.

  1. Home Equity Conversion Mortgage (HECM) – An offering of the Federal Housing Administration, and you can use the cash received for any purpose. Therefore, they are the most popular reverse mortgages in the market. 
  2. Proprietary reverse mortgage – Private lenders provide this type of reverse mortgage. It has no government backing. You can receive a bigger loan advance through this method if you have a higher-valued house.
  3. Single-purpose reverse mortgage – Nonprofit organizations and state and local government agencies offer these mortgages. You can use the amount only for a specific purpose. The amount you get is also relatively smaller than other reverse mortgages.

How much money can you get from a reverse mortgage?

Various factors affect the amount of money you can get from a reverse mortgage, like your home’s current market value, your age, current interest rates, and the type of mortgage you opt for. Whether you have any outstanding loan on your home also affects the cash amount you get.

Is a reverse mortgage a good idea for me?

If you are a senior homeowner with a lot of home equity but are short on cash, a reverse mortgage is a good option for you. You also get the flexibility of receiving the loans in a lump sum, monthly payments, or as a line of credit. 

The downside is the cost of obtaining the loan. If your cash payments exceed the home equity value, you may have to give up the property ownership to lenders.

About Bausley Home Loans & Realty

If you are looking for professional brokers to help you get a reverse mortgage in California, Bausley Home Loans & Realty is your one-stop destination. Our goal is to help our clients get the best loan amount with the least effort. We help our clients with FHA loans, VA loans, hard money loans, and other conventional loans. You can reach out to us at (818) 324-0873 or fill our online contact form to know more.
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