HECM (Home Equity Conversion Mortgages) have increasingly gained great popularity and recognition among different seniors across the world. These are special types of loans that are extended to seniors as long as they meet the eligibility conditions for these loans. These eligibility conditions are such as have a minimum age of 62 years and also have legal ownership documents of their homes. Many seniors especially in USA use these loans in order to supplement benefits such as social security benefits and pension benefits among other benefits. This is very important in that it helps in ensuring that seniors are able to attain financial independence as opposed to having to depend on relatives for support. However, despite the great popularity about these loans, there is not enough information about their nature, advantages and setbacks. Therefore there are different commonly asked questions such as:
Reverse mortgage-what type of a loan is it?
A reverse mortgage loan is a special home loan that bestows you with a chance to be able to convert your home’s equity (whether partially or fully) into cash. This is done by private lenders and lending agencies that in turn retain the home’s equity as security of the loan. However, there lies great difference between this type of loan and other mortgage loans. This is due to the reason that HECM loans are not repaid back like other mortgages are repaid back. A reverse mortgage only matures in the event that the borrower dies or the lending contract is breached by any of the two parties involved.
What are the qualifications for reverse mortgages?
It is quite easy for you to be able to qualify for a reverse mortgage especially if you meet the basic eligibility standards. These standards are such as have a minimum age limit of 62 years and that you should be the legal owner of the property which you want to use while applying for the loan. Other than these basic requirements, it is also important to ensure that you meet the set conditions such as living in the home and not reselling the house until such a time when the reverse mortgage has been cleared. The manner in which you bought your house with does not matter irrespective of whether you bought the house using FHA insured mortgages or on cash.
Which homes are eligible for reverse mortgages?
It is important to note that not all homes are eligible to qualify for a reverse mortgage. Homes that are eligible are such as a single family home where the home owner lives. In addition to this, a 2-4 unit home is also eligible provided that the owner lives in one of the units. What’s more unique about these loans is the fact that homes that are HUD approved condominiums are also eligible. All homes must meet FHA requirements in order for them to be eligible for these loans.
Before undertaking to apply for a reverse mortgage, always ensure that you are perfectly aware of the implications and the impact that the loans have on you as an individual.