Reverse Mortgage for Retirees

You can convert the equity in your home into cash if you are a 62 year older retiree or own your personal home. In simpler words, you can take out a substantial amount of loan against the equity in your home with the help of a reverse mortgage loan. You will not be required to pay off the loan as long as you live in your home and don’t sell it. You can increase your existing funds for your retirement period with the help of reverse mortgage.

Working of Reverse Mortgage

Reverse Mortgage for Retirees

When you take out reverse mortgage, your lender pays you on the basis of the percentage of the equity in your home. If you lose the ownership of your home your lender sells out your property to recover the payments that he/she had paid to you.

Types of Reverse Mortgage

There are various types of reverse mortgage loans. Some of these are offered by private lending institutions and some are offered by federal government or state. All these types share the features listed below.

  • Larger loan amounts are offered to elder homeowners. Larger loans are also provided for the more expensive homes.
  • A reverse mortgage loan must always be a primary loan against the equity in the home. Other lending institutions must be paid off or agree to supplement their debts to the primary loan carrier.
  • The cost of the loan may include the financing fees.
  • If you fail to keep the possession of your property in your hands then your lender may ask you to make repayments.

Home Equity Conversion Mortgage

This type of reverse mortgage is insured by federal government and it is the commonest type of reverse mortgage loan.

This loan guarantees that the lender or lending institution will fulfill the obligations and contains the costs to borrower. The only downside of this loan is the limited amount of loan.

Non-Home Equity Conversion Mortgage

Non-home equity conversion mortgage are offered by a number of lenders. These loans have an edge over the former type, as they offer a higher loan limit than HECM loans. The downside of these loans is that they are not secured by the federal government and can be costlier than the HECM loans.

Total Annual Loan Cost

The origin of the cost of a home equity conversion is limited to 2% of your home value, so the total cost of this loan is different from lender to lender. The interest rate on this loan is also defined by the government.

Increase Funds for Retirement

HECM allows you to add up more cash in your funds for your life after retirement. It creates various ways to provide you cash like credit lines, lump-sum payouts, monthly cash advance etc.

Interest on HECM

Interest on HECM

The interest on this loan is set in accordance with the U.S treasury security rate for one year. Borrowers can change their interest rate every year or every month. The yearly adjustable interest rate is usually capped at 2% or in some cases to 5% over the complete term of loan.

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