As reverse mortgages grow in popularity, more questions are surfacing from people who are interested in learning more about these popular home loans. A wide variety of resources do exist online. Sometimes, though, it can be difficult to find the reverse mortgage answers that you are seeking. We’ll take a look at the top three questions that are being asked online regarding these home loans and provide answers to them, so you can find the information that you’re looking for.
What’s the difference between a reverse mortgage and a regular home equity loan?
A reverse mortgage home loan is different than a home equity loan or a second mortgage. One primary reason is that unlike a home equity loan, you do not have to repay the reverse mortgage until you either are no longer occupying the home as your primary residence, you pass away or you do not meet the requirements that are required by the loan. The most popular reverse mortgage type is the FHA insured Home Equity Conversion Mortgage (HECM). You can either receive payments in a lump sum, as a line of credit, in monthly payments or in a combination.
What does a reverse mortgage cost?
A reverse mortgage does have costs that are associated with it, just like any other type of home loan that you would consider. Costs can include things like the origination fee, title search, recording fees, inspection fees, appraisal fees and other closing costs. In some cases, these costs are able to be rolled into the financing of the loan. The Federal Housing Administration (FHA) also mandates that a mortgage insurance premium is tendered, which can also add cost. The cost of these loans may vary between lenders, which is why it’s always smart to compare rates before making a decision.
Why do I need to get counseling before applying for a reverse mortgage?
The government and current laws mandate that all borrowers who are considering these loans undergo third-party counseling before they are approved. These counselors provide nonbiased feedback and educate borrowers, and they are not contracted or associated with the lenders. During a counseling session, they will educate you on how these loans works, the costs they entail and any prospective alternatives that you can explore. The goal of these counseling sessions is to educate borrowers so they make the best decision for their financial wellbeing.