Reverse mortgages are a unique loan product that allow homeowners to access the equity in their home without having to make monthly payments. The amount of money you can receive from a reverse mortgage depends on several factors, including your age, the value of your home, and the type of loan you choose. Generally, you can expect to receive between 40 and 60% of the appraised value of your home. To qualify for a reverse mortgage, you must be at least 62 years old and participate in a HUD-approved counseling session.
The amount of money you can receive is based on your life expectancy and current interest rates. You may be able to qualify for a one-time payment of nearly 50% of the value of your home if you have 100% capital, but this amount may be closer to 25% if you have 75% capital. In addition to the principal and interest on your reverse mortgage, you will be responsible for paying other fees. You can use an online reverse mortgage calculator to estimate the amount of a lump sum you're likely to qualify for; for other types of payments, which require more complex calculations, you should contact a lender or housing counselor.
It's important to consider how a reverse mortgage compares to other loan options before making a decision. The heirs must decide whether to pay off the reverse mortgage out of pocket (or with another loan) and keep the property or sell the house and use the proceeds from the sale to pay the balance. You can also use a line of credit growth feature that allows you to borrow money now and leave some credit available for the future. Reverse mortgages only expire when the borrower dies, lives outside the home for more than 12 months (unless a co-borrower or eligible spouse lives on the property), sells the property, or stops paying taxes and property insurance.
The lender charges an opening fee to cover the cost of processing your loan application. Because you're not paying the balance of your reverse mortgage, you'll make less profit when you sell, or you'll limit your borrowing power if you need a new loan.
