What is a Reverse Mortgage?
A reverse mortgage allows homeowners, aged 62 or older to convert a portion of their home equity into cash payments without selling the home or making additional monthly payments. Reverse mortgages can provide money for needed home repairs or supplement retirement income. A reverse mortgage does not need to be paid back as long as the homeowner continues to live in the home and it remains their primary residence.
A Reverse Mortgage or “home equity conversion mortgage” allows homeowners to take out some or all of the equity from their home. In fact, as a borrower you can choose one of five payment options during a reverse mortgage.
Five Payment Options for Reverse Mortgages
- Tenure
- Steady Monthly Payments
- Line of Credit
- Modified Tenure
- Modified Term
The first is tenure, which will give you a set amount as a monthly payment for as long as you live and continue to occupy the home as your principal residence.
The second option gives you steady monthly payments for a fixed amount of time set by you. This is a great option if you plan to sell the home eventually.
The third option is a line of credit, which allows you to make withdrawals up to a maximum pre-approved amount. This is a good option if you are looking to use the reverse mortgage for some security against unexpected expenses. Please note that unlike a Home Equity Conversion Mortgage, you do not have to pay these amounts back to the bank.
You may also chose a “modified tenure” a combination of tenure and a line of credit. This allows you to withdraw some money for immediate expenses, and still have the option available to withdraw more in the future while leaving the equity in your home.
Finally, a “modified term” combines the term option with a line of credit. This is a good option for a reverse mortgage if you need money to help with fixed expenses, but need the option in the future to withdraw additional money for unexpected expenses.
How Do I Qualify for a Reverse Mortgage?
In order to be eligible for a Reverse Mortgage, the current homeowner(s) must be at least 62 years old and own the home without a mortgage or have a low enough balance on the existing mortgage that it can be paid off when the mortgage closes with the money generated by the Reverse Mortgage. In other words, the homeowner(s) must owe less than half of the present value of the home in order to qualify. Please note that the home must be the principal residence of the owner(s); rental properties cannot be used for this type of loan.
Because of the nature of the government program that insures these loans, it is required by law that you must receive free or low cost reverse mortgage counseling from a HUD approved reverse mortgage counseling agency before they apply for a Reverse Mortgage in Indianapolis, Indiana. You can find a list of approved counselors in Indianapolis and the Indiana area online or by contacting a lender approved by the FHA to administer these types of loans.
For more information on applying for a reverse mortgage loan, contact Meridian Mortgage at 317-968-9500 or contact us online.
