Reverse mortgage pros and cons
Reverse mortgages are often marketed to seniors as an easy way of getting access and raising funds for retirement without reducing their standard of living. The good news is that there's no need wait until you're 63 years old before taking out this loan; the maximum age eligibility varies from state-to understand how much they can borrow, but in most cases it’s between 55 and 65 years old with a few exceptions such as Florida which allows people up until 70.
Before you rush off and apply, there's something important that few people know: The interest rates on these loans can be super high! This means if someone has less than perfect credit history then he might not qualify at all - even though she/he meets all other requirements, so make sure this doesn't happen by researching carefully first.
WHAT IS A REVERSE MORTGAGE?
Reverse mortgages are one way for property owners to get access cash when they need it most. The FHA insures these loans so if you don't pay back your reverse mortgage and debts, then the government takes over those balances with their reserves!
Homeowners can take advantage of this great opportunity by getting a reverse mortgage. The government calls them "HECMs," which stands for Home Equity Conversion Mortgages and there's an insurance upfront premium that you have to pay as well as annual fees based on 0 .5% per year long the loan lasts.
In addition to FHA-insured reverse mortgages, there are two other types:
Proprietary reverse mortgages: These are available through private lenders, and they are not subject to FHA loan limits.
Single-purpose reverse mortgage: State and local governments offer a single-purpose reverse mortgage that can be used for one specific need, such as renovating part of your home or paying property taxes. They are not common though they do exist; you may find these options through non profit organizations in addition to state sponsored programs like this!
HOW DO REVERSE MORTGAGES WORK?
With a reverse mortgage, you don't have to pay any interest until your loan is paid in full.
This means that even though the initial cost of borrowing $100k will be higher with this type of credit card-like product than it would on traditional mortgages (which come with fixed rates), over time these loans can actually save money because there's no monthly payment for principal or accruing additions onto both sides!
Well, it turns out that there is a catch. A reverse mortgage will not actually help you pay off any debt if the person who took out this type of loan dies before them or sells their home- which means all responsibilities for repayment fall onto someone else in your family.