A reverse mortgage is a loan available to people over 62 of age. The homeowner receives a a loan in the amount of the value of a house in a single payment or installments, which is to be repaid after his/her death or after his/her leaving the home permanently or selling the home. In any case, the home is sold and the loan repaid. The permanent leaving must be at least 364 consecutive days.
In a reverse mortgage, the homeowner makes no payments to the lender in connection with the loan. Upon each payment received by the homeowner from the lender the lender receives a larger percentage of the home equity. This is much different than in a conventional mortgage, where the homeowner makes monthly payments thus having a larger percentage of equity in the house every month.
If the value of a property has a greater value after a reverse mortgage is taken out, the homeowner can acquire a second reverse mortgage over the increased equity. A reverse mortgage may be refinanced if enough equity is present in the home.
If you’re considering a reverse mortgage, you must know that lenders generally charge an origination fee, a mortgage insurance premium, and other closing costs. The amount you owe on a reverse mortgage grows over time. Interest is charged and added to the amount you owe each month. Your total debt increases every month.
If you’re serious about getting a reverse mortgage, you might consider calculating the amount of reverse mortgage you can get by using an online reverse mortgage loan calculator.
In most case, you have at least 3 business days after closing to cancel the reverse mortgages for any reason, without penalty.