What is a Reverse Mortgage?
Reverse Mortgages allow homeowner’s to gain access to increased cash flow, by utilizing the equity that they’ve built up in their property.
A reverse mortgage is a type of FHA mortgage loan, which requires the borrower(s) to be at least 62 years of age.
With a reverse mortgage, instead of making payments to the mortgage lender, the borrower receives funds from the lender either as monthly income, a lump sum payment or from an established credit line.
Because the reverse mortgage is provided through the FHA, the property that is being refinanced must be the primary residence.
When qualifying you for the reverse mortgage, banks will typically look at the amount of equity the borrower has in the property, the borrower’s credit and also the borrower’s income.
The reason they’ll look at the borrower’s income is to make sure that they can afford property tax and insurance payments on the primary residence.
The reverse mortgage can also be used to purchase a property, however a very large down-payment must be made, probably in the 50% range, depending on the property and the borrower’s age.
Reverse mortgages are a great way for borrowers who are over the age of 62 to increase their cash flow by using their property equity.