Best Connecticut Reverse Mortgage

Reverse Mortgage Loans – How do they work?

Hello everyone, this is John Vecchitto, a local loan officer with North-East Financial in Middletown, CT. Nowadays we see so many advertisements for reverse mortgages, so today I wanted to talk about those and how they could benefit you.

A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash but retain your home ownership. Reverse mortgages work like traditional mortgages, only in reverse. Rather then making a payment to your lender each month, the lender pays you through advances against your equity. Unlike conventional home equity loans, most reverse mortgages do not require any repayment of principal, interest, or servicing fees for as long as you live in your home. Funds obtained from a reverse mortgage may be used for any purpose. This type of remortgage was originally designed so that seniors whose homes are paid for, or nearly so, can finance living expenses without having to sell their property.

To qualify for a reverse mortgage, you must own your home, occupy the home as a principal residence for more than six months out of a year, and be at least 62 years of age. If you have any debt against the home, you must either pay it off before getting a reverse mortgage or use an immediate cash advance from the reverse mortgage loan to pay it off.

The reverse mortgage funds may be paid to you in a lump sum, in monthly advances, through a line of credit, or in a combination of the three. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging. The greatest cash amounts generally go to the oldest borrowers living in the homes of greatest value on loans with the lowest costs.

Because you retain title to your home, you also remain responsible for taxes, repairs, and maintenance. Failure to carry out these responsibilities could result in the loan becoming due and payable in full. Depending on the plan that you select, although you generally are not required to repay the loan as long as you live in the home, it becomes due with interest when you permanently move, sell your home, die, or reach the end of the preselected loan term. The lender does not take the title to your home when you die, but your heirs must pay off the loan. The debt is usually repaid by refinancing the loan into a forward mortgage, if the heirs are eligible, or by using the proceeds from the sale of your home.

There are three reverse mortgage plans available: FHA-insured, lender-insured, and uninsured. With all three, interest on the loan amount is added to the principal balance each month. There will also be loan origination fees and closing costs with each. The loan is not taxable. When the loan term expires, you will either need to pay back the loan or sell your home and move.

Before you can close on a reverse mortgage you will be required to take counseling at the local office of the US Department of Housing and Urban Development or a HUD approved housing counseling agency. This is a free service of HUD and it will give you a good education regarding the various types of reverse mortgages and whether a reverse mortgage is right for you.

A reverse mortgage can be a good choice but they are not right for everyone. Feel free to give me a call at 860-918-0251 and we can talk about all your options.