If you are 62 or over, have a lot of equity in your home, and need money, you are in luck–even if you have bad credit. Reverse mortgages, also called Home Equity Conversion Mortgages (HECMs) are the only mortgages where people with bad credit pay the same rates as prime borrowers. That’s because you don’t pay this loan; it pays you.
Reverse mortgages were designed to help older homeowners stay in their homes even if their income is low. They allow borrowers to cash out their equity without worrying about making payments or selling. When you take out a reverse mortgage, the lender uses a complex formula and calculates how much you can borrow based on your age and the amount of equity in the home. You can take this money as a monthly payment, a lump sum, or a combination of the two. You are responsible for keeping up your home and paying the property taxes and insurance, but there are no mortgage payments–that’s why it doesn’t matter if you have bad credit.
The mortgage doesn’t have to be repaid until you move, sell the home, or die. The loan is repaid and any remaining proceeds from selling the home go to you or your heirs. No matter what the balance of the loan is, you never owe more than the value of the property. HECMs are administered by HUD and have some limitations, primarily the amount that can be borrowed against the property. Other private companies offer reverse mortgages in jumbo amounts and with differing eligibility requirements.
- |
- |
-
(12 votes, average: 5 out of 5)
Loading ...
So when you die, does the lender own the home?
What if the property decreases rapidly as what is happening now? Is it possible that the value could be less than the loan?
June- The house would be sold and whatever’s left goes to the kids…
Just curious, what are the loan limits on average? Enough to buy a home?
June,
When you die, the home becomes part of your estate. Your estate can sell the home to pay the loan, and if there is anything left over, the money goes to your heirs. The bank doesn’t own your home.
Dawn,
If the value of the home is less than the property, you will not be required to come up with the difference. You are responsible for maintaining the home, though, so if it falls down from lack of care there could be some repercussions.
Alan,
The HUD reverse mortgages (called Home Equity Conversion mortgages) have fairly low limits. However, other companies offer reverse mortgages on higher-valued properties. In addition, HUD recently increased the maximum reverse mortgage amount to $417,000. AARP has a cool little calculator that shows how much you can borrow on the HUD and Fannie Mae programs at http://www.rmaarp.com/