What Is A Boca Raton Reverse Mortgage?
Many people do not understand what reverse mortgages are. To be fair they are quite a complex financial product. If you are considering getting a for yourself or your elderly parents, it is important that you understand everything there is to reverse mortgages.
For instance, did you know that another name for reverse mortgages is a home equity conversion mortgage (HECM)?
This article will cover many of the conditions you need to meet before qualifying for a reverse mortgage loan as well as what the process entails.
By the time you are through with this guide, we hope that you will feel confident to take a Boca Raton reverse mortgage with NHL Lending.
Here are a number of conditions you need to satisfy before reverse mortgage lenders consider you eligible.
In order to qualify for your Boca Raton reverse mortgage loan you will need to be 62 years or older. If you are a couple, then the youngest should be at least 62 years of age.
You need to have enough equity in your home before taking out a reverse mortgage. Most lenders require that you have at least 40% equity in your home.
You can only take a reverse mortgage on a home that serves as your primary residence. Once you qualify for your reverse mortgage, you should continue living in your house. If for any reason you are away from your home for more than 12 months, your loan automatically becomes due.
Prior to qualifying for a reverse mortgage, the borrower is required to undergo a financial assessment that will examine their credit history as well as their income. Depending on the results of the financial assessment, the lender might determine that some of the proceeds of the reverse mortgage will go to paying insurance and tax.
There are different ways that the lender can disburse the reverse mortgage to the borrower. This includes:
- Line of credit
- Lump sum
- Modified term
- Modified tenure
- No Mortgage
Lenders usually demand that you pay off your mortgage with proceeds from your reverse mortgage.
Access to Equity
When you finally receive proceeds from your reverse mortgage, the lender will not give you all of your home’s equity. Instead, you will only receive a portion of it that is calculated based on the borrower’s age, the value of the borrower’s home as well as prevailing interest rates.
Role of the US Government
Even though the United States government insures home equity conversion mortgages, it does not lend any money of its own. To get a reverse mortgage you will have to work with a mortgage lending company such as NHL Lending. There was a time that you could rely on a large bank to offer you a reverse mortgage however, no more banks offer the facility. Banks like Bank of America and Wells Fargo have since exited the reverse mortgage market.
Here are some more facts you need to know about reverse mortgages.
According to estimates, by 2009 more than 50% of homeowners who were eligible for a reverse mortgage held more than 50% of their net worth in the home’s equity.
The first reverse mortgage of its kind was originated in 1961 by a financial institution in Maine, Portland. Beginning 1971, more private financial lenders came on board and began to issue reverse mortgages. Sometime in 1983, a special Senate committee for a program backed by the Federal Housing Administration. The following year, American Homestead decided to start a program that made it possible for borrowers to stay in their homes.
It was not until 1998 that the HECM program that had been running as a pilot became permanent.
As of 2011, the FHA has the authority to insure up to 275,000 HECMs annually.
Mistakes to Avoid with a Reverse Mortgage Loan
Spending Your Money Unwisely
You can use the proceeds from the reverse mortgage to foot your bills or meet other necessary needs during your years of retirement. Unfortunately, since there is no restriction on how people should spend their money, there are those who use the proceeds of a reverse mortgage to go on a shopping spree and buy lavish items.
In fact, it has been determined that many people who take a lump sum at closing are at a much higher rate of foreclosing since they cannot meet property tax and insurance on their properties.
So spend your money wisely.
Tell Your Family Members About The Reverse Mortgage
You should always tell your children that you opted to take Boca Raton reverse mortgage solutions to avoid an unpleasant surprise once it is due. Usually, when a reverse mortgage is due it has up to 6 months to be repaid. Not telling your children can be disastrous to them especially if they lived with you in the same house and realized that they had to move out.