How Can I Receive The Funds From A Reverse Mortgage?

A reverse mortgage allows seniors 62 and older to take out a loan against their home and never make a payment on it as long as they reside in the property. Over time, their balance will grow, thus the term, reverse mortgage. Reverse simply means the balance grows instead of decreasing like a traditional loan. The most popular type of reverse mortgage is a product developed by FHA in 1989 called the Home Equity Conversion Mortgage (HECM), otherwise known as a reverse mortgage.

There are three ways a borrower can receive money from a reverse mortgage. The choice of methods often depends on your goals for the loan. When determining how to receive these funds, keep in mind your goals for the money and that the first thing funds from a reverse mortgage pays is any existing mortgage, so that monthly payment no longer exists and you retain title to your home.

You can receive reverse mortgage funds by:

• Taking all the money as a lump sum payment – With this method of payment, you will receive a fixed rate and receive the cash all at one time. This can be beneficial because you know the interest rate going into the loan and it will not change. This method is beneficial when you are using a reverse mortgage to pay off a large debt.

• Establishing a line of credit – With a line a credit you will have a certain amount available to you as needed. This option works best for those who think they will have major expenses in the future but are unsure of these amounts. The line of credit option has a variable interest rate.

• Receiving monthly payments – This option gives the borrower extra income each month. The amount can be determined by the borrower based on the amount available, the amount needed each month and the length the money available will last at that rate.
You can also combine any of these methods for the most flexibility and accessibility.

How Much Money Will I Receive From A Reverse Mortgage?

To determine the amount you will receive from a reverse mortgage, the lender will take three factors into consideration – the age of the youngest borrower (must be at least 62), the value of the home and the interest rate on the product selected. Generally, a borrower can receive 50 to 75 percent of the value of the home. This range is subject to change and any potential borrower should talk to a lender to get an accurate estimate.

There are several important features potential borrowers need to know before they take out reverse mortgage:

• The customer will retain title to their home. They are not selling their home to the lender. There will be a mortgage on the home that will have to be paid eventually.

• There is no income and minimal credit qualifying required to obtain the loan. The home is the main factor the lender looks at before approving the loan.

• The borrowers are not liable for more than the value of their home, no matter how long they have the loan. This prevents individuals from having to pay back more than their home’s worth or leave a debt to their heirs they would be unable to pay.
Borrowers must continue to pay property taxes and homeowner’s insurance, reside in the home as the primary residence and keep the home in good repair. As long as these things are done, you can keep the loan as long as you like.

If you reside in Texas and are interested in learning more about a Texas Reverse Mortgage, please visit legacyreverse.com.