A reverse mortgage is a loan that is available to senior home owners, i.e. citizens over the age of 62 years and has sufficient liquidity in their home. There are no special incomes or any specific medical requirements needed to qualify for this loan. The reverse mortgage allows you to convert some of the assets in your home into cash without having them to sell their homes or deal with a new monthly mortgage expense. As the name suggests, the flow of payment is reversed, where instead of the borrower making monthly payments to the lender like in a regular mortgage, here the lender makes payments to the borrower.
There are various factors that determine the amount of loan that one is eligible for. These factors include the age of the borrower or, in case of couples, the age of the youngest spouse, the appraised value of the home, existing interest rates and the lending threshold available in your area in case of government programs. Which means that the older you are and the higher the value of your home, that more money you are eligible to get. They types of homes that are eligible to qualify for a reverse mortgage include single family home, manufactured home that are built subsequent to June 1976, 2-4 unit properties, town houses and condominiums.
The reverse mortgage offers a wide range of payment plans depending upon your requirements. You can either choose to receive the payments as one lump sum amount or in fixed monthly payments over a predetermined period or you may choose to receive it for as long as you continue to live in the home or as a line of credit or a combination of these different options. A large number of borrowers choose to receive the funds as a line of credit. It allows them to draw on the loan proceeds at any given point of time. The borrower can use the proceeds from the reverse mortgage for almost anything. The borrower can use it to cover the daily expenses, repair or make modifications to their homes like installing ramps or widening the hall. They can also use the proceeds to pay for health care pay off any existing debts, pay property tax, prevent any possible foreclosure, buy a new car or even take a long waited vacation.
Before you consider opting for a reverse mortgage it is advisable to get proper counseling in order to fully understand the program and also review other possible options. If you are planning to leave the home within 2-3 years, you must consider looking for other options like home equity loans or no-interest loans, which are less expensive.
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