Reverse Mortgage Facts:
- The U.S. Department of Housing and Urban Development, or HUD, started reverse mortgages in order to help home owners who are senior citizens pay for their living expenses and rising medical costs.
- To qualify for a HUD reverse mortgage you must be 62 years or older and either own a home that is completely paid off, or have a small balance left to pay on your current mortgage.
- A reverse mortgage is when a qualified homeowner borrows money against the equity they have built up in their home.
- Qualified homeowners can take a reverse mortgage in order to get a lump sum of money, receive a monthly income, or occasionally get money when they need it like a line of credit.
- Don't miss our Top 10 Things to Know About Reverse Mortgages before making your decision.
Florida has seen an influx of retirement-aged individuals over the last few decades, and many of these people own a home or very nearly do. These same seniors may have exhausted their financial resources and now find it challenging to live the lifestyle they were accustomed to. For individuals 62 and older, a reverse mortgage may be the perfect alternative to selling their current home. This is how the majority of reverse mortgages work:
The mortgage lender pays the homeowner cash through one of three methods, while the homeowner continues to live in the home! It sounds too good to be true, but the principle at work in a reverse mortgage is actually relatively simple. In a regular mortgage, the borrower pays the lender monthly payments that slowly reduce the amount of debt on the home. Additionally, with each payment, the borrower's equity in the home (the amount of the home's value belonging to the owner) increases. A reverse mortgage is the same principle in reverse: The lender pays the borrower, as the borrower's debt increases and equity decreases.
If a particular home-owning senior citizen qualifies for a reverse mortgage - and many do - there are three methods of payment to choose from. The first is a large lump sum of cash, paid all at once to the homeowner. This cash can be used for anything, from a luxury car or an around-the-world vacation to schooling for grandchildren. The second option is regular monthly payments. Finally, the third and most popular option for Florida reverse mortgages is a line of credit, where the borrower chooses how much money is paid to them at any particular time.
Learn More About How to Determine Your Home's Value
Perhaps the most appealing aspect of a reverse mortgage is that the cash doesn't need to be repaid as long as the owner is living in the home. In fact, the loan doesn't need to be repaid at all until the homeowner dies, moves away or sells the home. While a traditional mortgage could result in the loss of the home for lack of payment, with a reverse mortgage the borrower cannot borrow more than the value of the home, meaning Florida senior citizens cannot lose their homes.
With this type of loan, elderly Americans in Florida can once again experience financial freedom. After years of making payments on a home, it seems fitting that now seniors can get that money back without fear of needing to move away and sell a house they built and nurtured into a home. Florida reverse mortgages can provide peace of mind as a sensible option for seniors.
Reverse Mortgages can Help You Out of Financial Difficulties
Before you make a decision to take out a reverse mortgage you should know the pertinent information about the different types offered. The different types of reverse mortgages include:
- A Home Equity Conversion Mortgage. The majority of reverse mortgages are this type of loan guaranteed by HUD and the Federal Housing Administration. This loan may include a line of credit that can grow larger, various payment options for receiving your money and a maximum limit that is different depending on your location.
- The Homekeeper reverse mortgage through Fannie Mae includes a maximum lending limit as well but does not have growing credit limits. This reverse mortgage is guaranteed by Fannie Mae and often comes with lower closing costs than HUD reverse mortgages.
- The Private Cash account is often used for homes worth more than $500,000. These types of reverse mortgages often have growing credit lines and flexible payment options but higher closing costs.
