If you need help with a necessary bill, consider contacting a local assistance organization , which may be able to assist with fuel payments, utility bills and needed home repairs. Origination fee– to process your hecm loan, lenders charge the greater of $2,500 or 2 percent of the first $200,000 of your home’s value, plus 1 percent of the amount over $200,000. If you choose a hecm with a fixed interest rate, on the other hand, you’ll receive a single-disbursement, lump-sum payment. Bankrate.Com is an independent, advertising-supported publisher and comparison service.
If you choose not to make a monthly payment on the loan, interest for that month will get added to the total loan balance. There are also potential complications involving others who live in the home with the borrower, and what might happen to them if the borrower dies. Family members who inherit the property will want to pay close attention to the details of what is necessary to manage the loan balance when the borrower dies. Single-purpose reverse mortgage– this mortgage is not as common as the other two, and is usually offered by nonprofit organizations and state and local government agencies.
Justin pritchard, cfp, is a fee-only advisor and an expert on banking. He covers banking basics, checking, saving, loans, and mortgages. VA Loans He has an mba from the university of colorado, and has worked for credit unions and large financial firms, in addition to writing about personal finance for nearly two decades. The answer depends on the type of reverse mortgage loan for which you are applying. You can find a list of non-profit housing counselors on the department’s website.
These types of reverse mortgages are offered by state and local governments, or nonprofit lenders, and are usually the least expensive reverse mortgages. They are often only available to low to moderate income homeowners. A legitimate hecm loan product is insured by the federal housing authority. It enables eligible homeowners to access the equity in their homes by providing funds without incurring a monthly payment. Eligible borrowers must be 62 years or older who occupy their property as their primary residence and who own their property or have a small mortgage balance. See the fbi/hud intelligence bulletin for specific details on hecms as well as other foreclosure rescue and investment schemes.
Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower (or the borrower's estate) is generally not required to repay any additional loan balance in excess of the value of the home.
Aside from the potential for scams targeting the elderly, reverse mortgages have some legitimate risks. Despite recent reforms, there are still situations when a widow or widower could lose the home upon their spouse's death. What if someone else, such as a friend, relative or roommate, lives with you?
The sum you receive in a reverse mortgage is based on a sliding scale of life expectancy. For example, you might receive equal monthly payments and gain access to a line of credit. Like any major financial decision, you should carefully consider your options before deciding whether this loan is right for you. Fees reduce the amount of equity left in your home, which leaves less for your estate or for you if you decide to sell the home and pay off the mortgage. It might be wise to pay interest and fees out of pocket if you have the funds available instead of paying interest on those fees for years and years when they're rolled into your loan balance.