There are currently three main categories of reverse mortgage lenders: home equity reverse mortgage, non-recourse reverse mortgage, and recourse reverse mortgage. The home equity reverse mortgage is currently the most popular type of reverse mortgage financing. It provides seniors with a lump sum of money to use as they wish. The amount they receive depends on how much their home is worth at the time of the transaction. This type of reverse mortgage differs from other types of reverse mortgages in that there is no need for a qualified borrower to prove that he or she has good credit.
Non-recourse reverse mortgage lenders are usually only able to provide funds if the borrowers are still living in their homes. This means that the borrowers must still have ownership of the property they live in when the loan is made. Many seniors prefer this option because they do not want to risk losing their home to foreclosure. The amount they can receive is usually lower than they could receive using a conventional loan. Seniors who remain in their homes can also benefit from having this option because they do not have to come up with closing costs.
On the flip side, recourse reverse mortgage lenders can only provide funds if the homeowners are no longer living in their homes. These loans do not require borrowers to prove they are still homeowners. The amount that they receive is based on how much equity they have built up in their home. Lenders look at the debt to income ratio and remaining mortgage payments to determine the maximum amount of money they will allow the senior to borrow.
Service charges and closing costs can eat into the amount of money you can receive. Many reverse mortgage lenders require borrowers to pay the service charge and/or closing costs. Although these upfront costs are usually required, many seniors choose to bypass them. The reason for this is to avoid paying additional taxes on the funds received under the program.
When you take out a reverse mortgage, it means signing a promissory note. The note is an agreement between you and the lender outlining all of the details of the loan. This includes interest rates, payment terms, and any other fees or charges. A lender may also include a reverse mortgage insurance policy. The insurance pays off should the loan become past due.
With most reverse mortgage programs, there are no restrictions on how the funds can be used. For instance, you can use the funds to make home improvements or pay off credit card bills. However, the only limitation is the amount. Even with restrictions, home equity loans are considered a flexible and convenient way to finance your retirement, especially for seniors who are not homeowners. Since these types of loans carry low-interest rates, the money can be easily applied to many expenses.
Reverse Mortgage Lenders offer online applications. You can submit forms online and receive approval in a matter of minutes. Since these loans do not require a credit check, most lenders do not require a cosigner. If you consider this type of equity loan, remember that home equity loans carry a higher interest rate than traditional mortgages. This is especially true if you have poor credit or if you have already had debt issues.
Once you decide to pursue a reverse mortgage, you need to find a lender. In general, most home equity lenders do not provide direct access to consumers. Therefore, it may be necessary to work directly with a private lender. For example, some private lenders will work with seniors to find the best financing option available for a single-use reverse mortgage loan. Although this process can be time-consuming, it allows you to save hundreds of dollars compared to the fees typically charged by conventional lenders.