WHAT YOU NEED TO KNOW ABOUT REVERSE MORTGAGE

Are you thinking about retirement? One factor that you need to keep in mind is a reverse mortgage. So, what is a reverse mortgage? Simply said, it is the reverse of a standard mortgage loan. Reverse mortgages are loans for seniors who own a home. A reverse mortgage allows you to convert the equity on your home into cash and this amount can be paid to you in a number of ways, either lump sum or monthly installments.

The most common type of reverse mortgage is the HECM (Home Equity Conversion Mortgage). This is the only reverse mortgage that is insured by the federal government. They are insured by the FHA which tells the HECM reverse mortgage lenders how much they can lend you. The amount of the loan is based on the equity within the home and your age.

The big advantage of a reverse mortgage is that you can turn the value of your home into cash without having to move or to repay the loan each month. Reverse mortgage can be used to obtain a lump sum of money for any purpose such as home repairs, to receive monthly payments such as to supplement your retirement, and to create a source of money in case of an emergency. Any of these three payment methods could help you in your retirement.

However, reverse mortgages are more costly than other types of home loans. Because you are not making payments, the amount of interest applied to the loan continues to compound each month. It adds up much more quickly and can end up eating away all of your hard earned equity. Also, most all reverse mortgages have variable interest rates. Your rates will vary as the market changes. Additionally, you cannot claim the interest you pay on your reverse mortgage on your taxes until the loan is paid.

If you are considering a reverse mortgage on your home, you can eliminate some of the mystery about how much you can expect in the way of a reverse mortgage loan by using a HECM calculator. It require you to input some data concerning your home’s estimated value, but are relatively easy to use and will be the quickest way you have of determining if taking a reverse mortgage on your home will be a good move.

Of course, before choosing a reverse mortgage, you need to find a reverse mortgage counselor specializing in this type of mortgage. A good reverse mortgage counselor will educate you throughout the process.