Top 3 Things to Know about a Reverse Mortgage

The reverse mortgage is a very popular product for those that are in retirement. This can be a great way for you to create a source of income if you are eligible. Here are a few things for you to know about the reverse mortgage.

1 - Eligibility

One of the first thing that you should know about a reverse mortgage is whether you are eligible for it or not. In order to be eligible to get started with the process, you must be at least 62 years of age. This age requirement will apply to both you and your spouse.

In addition to age requirements, you will also have to have a home that is paid off or have a very low mortgage balance. The property that you will be using for the loan also must be your primary residence in order to qualify.

You also cannot have any federal debt that is considered to be delinquent. If you meet all of these requirements, you will also have to attend an informational session with a certified counselor about the reverse mortgage.

2 - Outliving Loan

Many people that have considered getting a reverse mortgage wonder what would happen if they outlive the loan. With a reverse mortgage, the lender is going to be sending you monthly payments to slowly purchase your home's equity. Once they have paid off the equity, you will no longer be receiving any payments. However, that does not mean that you will have to start repaying them or move out of your house. At this point, the lender will allow you to stay in the property as long as you want. The lender will not be repaid until you move out and sell the property. Even if one spouse dies, the other spouse is still allowed to stay in the property for as long as they desire.

3 - Heirs

Many people also wonder how this will affect their heirs. If you die after getting involved with this type of mortgage, the debt for the mortgage will have to be repaid before your heirs can receive any benefits. For example, if you have a life insurance policy, money from the policy may be used to pay off the reverse mortgage before any money is given to your children.

Your heirs would also have the option of selling the property and using that money to pay off the reverse mortgage balance if they did not want to use money from a life insurance settlement. With this program, you are essentially selling your equity to the bank in order to create a residual income for yourself. This is going to have the effect of lowering the amount of inheritance that you can leave to your children. However, it does not necessarily mean that you will not be able to leave them anything. They will just have to worry about paying off the balance of the reverse mortgage before getting any of their inheritance.

What is a reverse mortgage wholesale loan?

A reverse mortgage wholesale loan is originated by a mortgage broker. Wholesale loans are offered by lenders that do not perform all of the loan origination services themselves. They offer lower loan rates so that the mortgage broker can mark up the loan and make a profit as well. Since this type of loan is a reverse mortgage, it is only for individuals who are 62 or older. They can use this type of mortgage to generate monthly payments in return for the equity in their homes that they own outright. 

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