Information about Reverse mortgage
What is Reverse Mortgage?
A reverse mortgage is a form of equity release (or lifetime
mortgage) available in the United States. It is a loan available to seniors
aged 62 or older, under a Federal program administered by HUD. It enables
eligible homeowners to access a portion of their equity. The homeowners can
draw the mortgage principal in a lump sum, by receiving monthly payments over a
specified term or over their (joint) lifetimes, as a revolving line of credit,
or some combination thereof (i.e. into aged care) a type of
mortgage in which a homeowner can borrow money against the value of
his or her home. No repayment of the mortgage (principal or
interest) is required until the borrower dies or the home
is sold. After accounting for the initial mortgage amount, the rate at
which interest accrues, the length of the loan and rate of home price
appreciation, the transaction is structured so that the loan
amount will not exceed the value of the home over the life of the
loan.
Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.
Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.
Concept of Reverse mortgage:
Reverse mortgages have grown in popularity over the duration
of the last decade among homeowners age 62 and over, and with good reason; a
Senior Reverse Mortgage or Senior Equity Mortgage can help homeowners to tap
into the equity that they have accumulated in their home and utilize these
funds as they see fit. Reverse mortgages do not require a monthly payment to be
made from the borrower to the lender, and can provide the homeowner with needed
cash to do with as they see fit.
A
Reverse Mortgage essentially functions exactly opposite of a conventional mortgage;
instead of making a payment each month, the homeowner can elect to receive a
monthly disbursement into their bank account from their lender for as long as
they stay in the home! Trinity Mutual is a FHA Reverse Mortgage Lender, and we
specialize in Government Insured loans.
Qualification
for a Reverse Mortgage is quite simple; since the homeowner is the one
receiving the monthly payment, there are no credit checks, income requirements,
or medical evaluations. Simply the homeowner must be age 62 or older and have
equity in the home.
Reverse mortgage proceeds:
The amount of
money available to the consumer is determined by five primary factors:
- The appraised value of the property, whether any health or safety repairs need to be made to the house, and whether there are any existing liens on the house.
- The interest rate, as determined by the U.S. Treasury 1 year T-Bill, the LIBOR index or 1 Year CMT.
- The age of the senior (The older the senior is, the more money he/she will receive).
- Whether the payment is taken as line of credit, lump sum, or monthly payments. Line of credit will maximize the money available, while lump sum provides the cash immediately, but the interest fees are the highest. Monthly payments may be set up by the Department of Housing and Urban Development [HUD].
All
these factors contribute to the Total Annual Lending Cost (TALC) as defined by
the US Federal Government Regulation Z, the single rate which includes all the
loan costs. The specific formulas to calculate the impact of the factors listed
above can be found in Appendix 22 of the HUD Handbook 4235.1.[2]
There are
reverse mortgages for homes valued over the maximum limit. These are called
"Jumbo" reverse mortgages, and are generally offered as proprietary
reverse mortgages. For homeowners of higher-valued homes, a Jumbo loan can
provide a larger loan amount. However, these loans are currently uninsured by
the FHA and their fees are often higher.
However, I'll Post gradually about This system.
