Reverse Mortgage
If you have owned your home for several years and have substantially paid down the mortgage, as an alternative to re-financing you might want to consider a Reverse Mortgage. With a reverse mortgage, homeowners at least 62 years old can extract a portion of their home's equity without selling the home or taking out a home-equity loan. Unlike a traditional mortgage requiring monthly principal and interest payments to the finance company, in a reverse mortgage the lender pays the homeowner, either as a lump sum or monthly payments that last as long as the borrower remains in the home.
Lender Fees typically include:
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2% of the home's value as an origination fee
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2% mortgage insurance
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Closing costs associated with a typical loan
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Monthly service fee over the life of the loan
- the homeowners age
- location and value of the home
- prevailing interest rates
- for government insured loans, maximum amount in urban areas is currently $362,790 and $200,160 in rural areas
Your equity decreases as your mortgage balance increases, but you never owe more than the value of the home. For more information, see the AARP Reverse Mortgage website at www.rmaarp.com
Currently, about 90% of reverse mortgages are insured by the government through HUD's Home Equity Conversion Mortgage, which can not exceed a certain amount regardless of how much the house is worth. Additionally, federal rules require financial counseling to ensure the reverse mortgage is understood. Lenders providing non-federally insured reverse mortgages are also available.
At this time Ginnie Mae is also preparing to package reverse mortgages to Wall Street and financial markets.
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