A reverse home mortgage is a great way for senior homeowners to supplement their income with the equity in their homes. The equity is used as collateral against a mortgage loan where you actually receive payments instead of making them. At First Savings Bank we can help you understand and take advantage of the variety of payout options as well as the variable or fixed rate options.
It’s easy to qualify for a reverse mortgage loan. The homeowner must be at least 62 years of age and the home must either be owned free-and-clear or the balance on the current home mortgage must be no more than 65% of the home’s value. There are no income or credit requirements, and an FHA reverse mortgage cannot be outlived. As long as at least one homeowner still lives in the home, and taxes and insurance are kept current, the loan does not need to be repaid.
Fixed Rate vs. Variable Rate
A fixed rate reverse mortgage is a “closed end instrument” and you have to take the entire loan amount at the very beginning. If you would like to use the money to pay off an existing mortgage then this may be a good option for you. If that isn’t the case, receiving this large lump sum all at once may do more harm than good because you will start accruing interest on the entire amount right away. This can adversely affect some seniors involved in need-based programs.
The variable rate option, on the other hand, may be more beneficial for all others because it typically accrues interest much slower and at a much lower rate in today’s market. One reason for this is the flexibility in how you can receive the money from your reverse mortgage since you only accrue interest on monies you’ve received or drawn. You can receive your money with this option in a few ways, including:
- Lump sum (much like the fixed rate payout)
- Monthly payments for a specified term
- Monthly payments guaranteed for life (tenured)
- Line of credit – you can draw money as you need it
- Any combination of the above options
The total amount of money you may be eligible for in a reverse mortgage FHA ultimately depends on the rate at which the loan accrues interest. Your current and future needs will also play a large role in deciding which option will work best for you.
Please contact us to speak with a reverse mortgage lender who can discuss your circumstances and help you decide what will work best for you and your family. You can reach a licensed reverse mortgage loan officer at 1-888-407-0010 or just fill out the form and we will call you shortly.