Reverse mortgages offer older homeowners significant financial security. Unfortunately, these loans remain largely misunderstood by many consumers.
Understanding the benefits of a reverse home loan can help potential borrowers determine if these programs may work for them. Intercap Lending has these and other home-loan products available to clients in Orem and throughout northern Utah.
What Is a Reverse Mortgage?
With a traditional mortgage, homeowners make monthly payments for the purpose of building equity. A reverse mortgage, also known as a home equity conversion mortgage or HECM, allows those same homeowners to access that equity at a time when limited income may become a cause for concern.
By the time they reach their 60s, many older Americans have built a significant amount of equity in their home. These programs allow borrowers to pull equity out of their home in the form of cash, which can be used for medical bills or other expenses, or simply to provide peace of mind for the future.
How Do Reverse Mortgages Work?
The amount you can borrow depends on how much equity you have in your home and how old you (and your co-applicant, if applicable) are. The older you are and the more equity you have, the more cash you can pull out.
Like a regular mortgage, you will have closing costs and will accrue interest on the loan over time. Most reverse mortgages use a variable interest rate structure, although some programs offer a fixed rate.
With a line of credit HECM, you can decide whether you want to pull the full loan amount out now or draw it down as you need it. Other programs, known as term loans, will send you a payment each month for a specified number of years. Modified term HECMs combine the term and line of credit terms, sending you a payment each month but also giving you access to additional funds when you need them.
Tenure HECM loans send you a payment each month for as long as you live. Modified tenure loans send you a payment and provide access to additional funds.
Most HECM loans do not require you to make payments as long as you occupy your home. Once you no longer live in the home, you (or your estate) will have a set amount of time — typically six months to one year — to sell the home and pay off the balance of the HECM loan.
What Are the Requirements of a Reverse Mortgage in Orem, Utah?
To qualify for an HECM loan, the borrower(s) must be age 62 or above. The home you wish to borrow against must be your primary residence and you must own it outright or have enough equity to pay off the existing loan with the HECM loan. Borrowers must complete a brief financial counseling program before close of escrow.
Your home must be in a reasonable condition, based on the opinion of an appraiser.
However, since the loan will be based on the equity you already have in your home, your credit score and other financial criteria do not influence your ability to qualify for a HECM.
Contact Intercap Lending today to learn more about HECM programs, or to start the application process for a reverse mortgage.