PrintWhile reverse mortgages have helped thousands of homeowners, changes are in store as the result of losses suffered by the Federal Housing Administration, which guarantees most reverse mortgages. As a result, reverse mortgages are going to be less generous in years to come. FHA recently announced major changes to the popular loan program.
What is a reverse mortgage? Reverse mortgages allow homeowners over the age of 62 to access the equity in their homes get cash out of their homes. Under a reverse mortgage, instead of making a mortgage payment to reduce your debt, you receive money and increase your debt. Borrowers can take out a large chunk, or they can take a monthly income stream to supplement other sources of retirement income.
You have to qualify and meet certain conditions to use these loans. They are designed for retirement-age people who have the desire and ability to spend down the equity in their homes over the long term. You can choose to receive payments using variety of options including lump-sum, periodic payments, line of credit, or a combination of options.
Like all loans, reverse mortgages have costs. A major cost is the interest you pay on borrowed money, and there may be other costs as well. Most costs can be bundled with the loan so you do not pay out of pocket.
If you’ve been thinking of using a reverse mortgage, you should check out the latest terms and conditions. Programs available in the coming years will almost certainly be different from what you’ve seen in the past.
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